UNIVERSITY  ©f  ILL 


ANTI-OPTION  LEGISLATION-PATERNAL  INTERFERENCE 
WITH  BUSINESS; 


SPEECH 


HON.  JOHN  DE  WITT  WARNER, 

OF  NEW  YORK, 


IN  THE 


HOUSE  OF  REPRESENTATIVES, 

Monday,  June  18,  1894. 


WASHINGTON. 

1894. 


, 

% 

t 


VA./^o 


Anti-Option  Legislation — Paternal  Interference  with  Business- 


SPEECH 

OF 

HON.  JOHN  DE  WITT  WARNER, 

OF  NEW  YORK, 

Ln  the  House  of  Kepresentatiyes, 

Monday ,  June  18 ,  1894 . 


J) 

cr* 


a-.: 


The  Honse  being  in  Committee  of  the  Whole  on  the  state  of  the  Union,  and 
having  under  consideration  the  bill  (H.  R.  7007)  regulating  the  sale  of  certain 
agricultural  products,  defining  “options”  and  “futures,”  and  imposing  taxes 
thereon  and  upon  dealers  therein— 

Mr.  WARNER  said: 

Mr.  CHairman  :  Rising  as  I  do  by  the  courtesy  of  the  gentleman 
from  New  Hampshire,  who  yields  me  his  precedence  but  not  his  time, 
I  disclaim  interference  with  the  informal  arrangement  by  which  my 
friend  (Mr.  Cobb  of  Missouri)  controls  the  time  in  opposition  to  this 
bill. 

Now,  sir,  I  want  to  start  off  by  joining  with  my  friend  from  Mis¬ 
souri  (Mr.  Hatch)  in  the  straightforward  appeal  that  he  has  made 
to  this  House.  I  beg  every  member  of  this  House  to  read  this  bill 
through — not  to  read  merely  the  four,  five,  or  six  sections  which  my 
friend  from  Missouri  thinks  will  be  enough  for  you,  but  to  read  the 
whole  bill.  Read  it  through  from  beginning  to  end — and  it  will  be 
too  much  for  most  of  you. 

If  we  could  have  a  civil-service  examination  of  the  Democrats  in 
this  House  upon  this  bill  and  be  assured  that  they  would  all  so 
qualify  themselves  as  to  try  to  pass  it,  there  would  be  no  question 
but  that,  without  a  single  negative  vote  from  the  other  side,  we 
would  overwhelmingly  defeat  it  by  our  own  votes.  It  is  because 
this  bill  is  undemocratic;  it  is  because  it  is  paternal;  it  is  because 
it  is  unconstitutional;  it  is  because  it  is  intermeddling  ;  it  is  because 
it  sums  up  in  one  bunch  nearly  all  the  sins  for  which  we  have  so 
long  cursed  and  labored  with  the  heresies  of  our  brethren  on  the 
other  side  of  this  House  that  I,  for  one,  am  opposed  to  it. 

Now,  sir,  it  is  very  reassuring  to  be  told,  as  we  are  told  by  the 
report  upon  this  bill,  that  the  bill  is  the  result  of  long  and  patient 
investigation  and  study,  that  the  committee  have  had  it  under  con¬ 
sideration  since  early  in  the  session.  Why,  Mr.  Chairman,  that 
statement  is  altogether  too  modest.  Since  the  time  when  it  was 
introduced  as  a  Republican  measure  in  the  Fifty-first  Congress, 
right  down  to  the  present  time,  long  after  it  has  been  repudiated 
by  gentlemen  who  first  presented  it,  I  suppose  scarcely  a  day  or 
an  hour  has  passed  but  that  my  friend  from  Missouri  has  been  giv¬ 
ing  this  measure  careful  consideration,  and  if  there  is  anything 
1455  3 


i^P 


4 


whicli  proves  that,  it  is  the  extent  to  which,  by  giving  it  consid¬ 
eration,  he  has  changed  his  mind  since  he  last  explained  this  meas¬ 
ure  to  the  House. 

On  a  survey  of  his  work  uo  one  will  question  the  further  sugges¬ 
tion  of  the  report  that — 

The  opposition  to  this  bill  will  be  different  from  that  which  had  to  be  met  in 
the  bill  which  was  before  the  last  Congress.  Every  argument  urged  against 
that  measure  is  met  in  this. 

In  fact,  there  is  scarcely  a  shred  left  of  the  bill,  which,  two 
years  ago,  was  pressed  as  perfect,  and  there  is  scarcely  a  single 
argument  which  could  have  been  urged  in  support  of  the  former 
measure  which  the  bill  as  now  presented  does  not  repudiate. 

Two  years  ago  my  friend  from  Missouri  was  breathing  fire  against 
all  dealers  in  produce  for  future  delivery,  and  was  willing  for  the 
time  being  to  throttle  his  Democratic  tendencies,  and  adopt  the 
most  paternal  methods  to  stamp  them  out.  He  proposed  to  make 
everybody  who  dared  touch  the  accursed  thing  first  pay  a  license  of 
$1,G00,  and  then  proposed  to  fine  him  at  the  rate  of  5  cents  for  every 
pound  of  cotton,  hops,  pork,  etc.,  aifd  20  cents  a  bushel  for  all  pro¬ 
duce  sold  by  that  measure,  and  to  make  him  give  a  bond  ot  $40,000 
to  keep  his  books  so  that  the  Government  could  always  “make  tfie 
penalty  fit  the  crime.”  Such  was  his  position  after  the  two  years  of 
consideration  he  had  then  been  enabled  to  give  the  matter.  Two 
years  of  further  study  have  ameliorated  his  mental  condition.  He 
is  now  careful  to  explain  that  “legitimate  speculation  is  the  very 
heart  blood  of  commerce;”  and  is  as  vociferous  in  defending  con¬ 
tracts  for  future  delivery  as  he  was  two  years  since  in  their  con¬ 
demnation.  Two  years  ago  the  result  of  his  study  had  convinced 
him  that  “most  members  of  the  exchanges  deal  in  ‘puts  and  calls/” 
which  he  rightly  brands  as  gambling  of  the  worst  sort;  but  now 
he  tells  us  that  “but  a  small  percentage  of  the  menbership  of  any 
board  of  trade  in  the  United  States,  save  perhaps  the  Cotton  Ex¬ 
change  of  New  Orleans,  and  the  Cotton  Exchange  of  New  York, 
deal  in  ‘speculative  gambling’  contracts.” 

If  confession  is  good  for  the  soul,  and  we  can  judge  of  his  feelings 
by  the  wholesale  renunciation  of  the  views  entertained  by  him  two 
years  ago  which  he  has  made,  my  friend  from  Missouri  is  doubtless 
the  happiest  man  in  this  House.  If  this  is  his  experience,  as  I  have 
no  doubt  it  is,  I  know  he  will  thank  me  for  the  suggestion  that 
he  ask  unanimous  consent  that  the  pending  measure  be  referred 
back  to  him  for  further  consideration.  For,  sir,  if  we  are  to  judge 
of  the  future  by  the  past  the  result  would  most  certainly  be  that, 
by  this  date  two  years  hence,  his  patient  investigation  and  study 
would  have  obliterated  the  bill  entirely,  and  my  friend  from  Mis¬ 
souri  would  lead  the  Democrats  of  this  House  in  opposition  to  any 
such  scheme  as  this  for  extension  of  Federal  powers,  for  paternal 
interference  with  the  details  of  legitimate  business,  and  for  obstruc¬ 
tion  to  that  part  of  our  commerce,  the  free  transaction  of  which  is 
most  essential  to  the  great  agricutural  interests  of  our  country. 

FLOUR. 

I  am  sorry,  however,  not  to  be  able  unreservedly  to  congratulate 
my  friend  upon  the  progress  he  has  made.  As  his  bill  was  intro¬ 
duced,  it  included  flour  among  the  articles  over  which  his  watchful 
care  was  to  be  exercised.  I  understand  that  this  article  was  omitted 
from  the  bill  as  finally  reported  by  him  upon  information  that  this 
article  was  always  sold  by  special  brand  of  the  miller  who  ground 
it.  Personally  I  have  not  been  able  to  understand  why  every  facil¬ 
ity  should  be  given  the  miller  to  corner  the  wheat  market,  at  the 
same  time  that  the  system  of  sales  for  the  future  delivery  of  flour 
was  encouraged  so  as  to  keep  anybody  from  cornering  him.  This, 
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however,  might  be  explained  by  the  fact  that  the  corresponding 
bill  in  the  Senate,  known  as  the  Washburn  bill,  was  composed 
under  circumstances  which  did  not  exclude  the  milling  interests 
from  close  consultation. 

No  such  consideration,  however,  would  commend  such  a  course 
to  my  friend  from  Missouri,  who  is  certainly  more  of  a  farmer 
than  he  is  a  miller,  and  I  know  he  will  appreciate  my  defense  of  his 
motives,  at  least,  when  I  assure  him  that  he  is  mistaken  in  his  as¬ 
sumption  regarding  flour,  and  indeed  that  he  must  have  been 
“  stuffed”  by  wicked  men  with  intent  to  lead  him  astray.  It  is 
true  that  the  Washburns,  and  Pillsburys,  and  other  great  North¬ 
west  millers,  do  have  their  special  brands,  and,  to  a  large  extent,  do 
actually  manufacture  the  flour  they  permit  to  be  sold  under  those 
brands.  It  is,  however,  equally  true  that  our  great  exporters  and 
jobbers,  through  whom  is  carried  on  our  great  foreign  trade,  are 
accustomed  to  make  sales  for  future  delivery,  either  by  contracts 
providing  that  the  flours  delivered  shall  be  equal  to  samples,  or  by 
brands  of  their  own  which  have  no  earthly  relation  to  any  mill  or 
miller,  but  which  represent  simply  a  standard  grade  which  they 
carefully  maintain,  and  to  fill  contracts  for  which  they  purchase 
flour  indifferently  from  any  source  whatever  that  furnishes  it  in 
sufficiently  good  and  uniform  grades.  In  other  words,  while  it  is 
true  that  but  a  small  proportion  of  the  flour  marketed  is  marketed 
by  sample,  it  is  also  true  that  the  practice  of  selling  futures  in  flour 
by  brands  which  are  merely  guaranties  of  quality,  and  which  are 
filled  by  purchases  afterward  made,  is  so  general  as  utterly  to 
vitiate  the  gentleman’s  supposition.  I  have  no  question  as  to  the 
sincerity  Of  my  friend  from  Missouri.  If,  however,  one  may  judge 
from  such  a  particular  as  this,  it  is  evident  that  his  opinion  has 
been  swerved  by  some  one  who  was  about  a  thousand  times  as  much 
of  a  miller  as  is  my  friend  from  Missouri  a  farmer.  [Laughter.] 

I  have  such  respect,  sir,  for  the  position  of  my  friend,  and  I  know 
that  the  House  will  rely  so  largely  upon  his  judgment,  that  before 
I  take  up  the  special  provisions  of  his  pending  bill  I  venture  hastily 
to  sketch  his  attitude  from  another  standpoint.  How  radically 
different  is  his  present  bill  from  that  of  two  years  ago  I  have  inade¬ 
quately  suggested.  But,  sir,  when  we  come  to  compare  the  report 
that  he  made  then  with  the  one  which  accompanies  the  bill  now 
under  discussion,  it  is  as  surprising  as  pleasing  to  find  that  his 
present  statement  of  the  several  objects  had  in  view  is  almost  word 
for  word  that  with  which  he  prefaced  the  oue  we  were  not  permitted 
to  discuss  in  the  Fifty-second  Congress.  How  valuable,  however,  is 
this  statement,  which  is  the  backbone  of  the  recent  report,  may  be 
inferred  from  the  fact  that  two  years  since  it  prefaced  with  equal 
grace  a  most  full  and  contradictory  explanation  of  a  totally  differ¬ 
ent  bill. 

THE  CHARACTER  OF  THIS  BILL. 

Taking  up  the  bill  reported  by  the  committee — the  ruins  of  the 
really  imposing  structure  presented  by  it  a  few  years  ago — I  beg, 
sir,  to  call  attention  to  a  defect  of  that  old  bill  which  this  new  one 
has  preserved  and  even  exaggerated.  In  the  first  section  is  carefully 
defined  what  among  business  men  is  known  as  “  privilege  ”  dealing — 
gambling  in  “puts  and  calls,”  “straddles  and  spreads.”  I  do  not 
suppose  that  there  is  any  one  in  the  United  States  that  will  defend 
these.  The  very  ones  who  engaged  in  them  would  be  most  prompt 
to  admit  that  they  are  gambling,  pure  and  simple. 

Mr.  CANNON  of  Illinois.  I  would  like  to  ask  a  single  question. 
My  friend  is  talking  about  “options,”  “puts,”  and  “calls”  and  other 
transactions  that  I  do  not  know  much  about.  But  1  find  that  in 
section  5,  page  4,  of  this  bill  there  is  a  provision — and  I  am  inclined 
1455 


6 


to  think  it  is  a  very  valuable  one,  because  I  do  not  know  exactly 
what  it  means  [laughter] — that  a  “contango”  agreement  shall  be 
in  writing.  I  think  that  must  be  something  very  useful. 

Mr.  WARNER.  I  am  coming  to  that  section;  and  I  am  going  to 
demonstrate  that  my  friend  from  Missouri  does  not  know — I  will 
not  say  he  does  not  know  what  “contango”  means — but  that  he 
does  not  know  what  some  other  words  there  mean.  It  must  be 
remembered,  however,  first,  that  these  gambling  transactions  have 
nothing  whatever  to  do  with  either  the  real  produce  or  its  price. 
They  are  simple  bets  as  to  what,  at  some  definite  time  in  the  future, 
will  be  the  price  or  variations  in  price  of  the  article  referred  to. 
They  have  no  more  to  do  with  actual  supply  and  demand,  which  is 
the  real  criterion  of  price,  than  do  the  bets  upon  a  horse  race  add 
to  or  take  from  the  speed  with  which  either  of  the  horses  completes 
his  course.  There  is,  however,  no  defense  for  them. 

The  only  questions  in  this  regard  are,  whether  the  evil  is  one 
which  may  properly  be  attacked  by  law,  and,  second,  whether  it  is 
one  the  dealing  with  which  comes  within  the  legal  powers  of  Con¬ 
gress. 

I  had  expected,  Mr.  Chairman,  to  make  somewhat  of  an  argu¬ 
ment  on  these  questions,  but  from  a  Democratic  standpoint  the 
objects  of  this  bill  are  so  scandalous,  and  this  was  so  well  illustrated 
by  my  friend  himself  in  his  discussion  of  them,  that  he  leaves  me 
but  little  to  do.  He  admits  that  his  object  is  to  enact  by  Federal 
statute  a  new  provision  of  criminal  law.  He  tells  you  that  he  pre¬ 
fers  the  proposition  which  was  pending  in  the  other  House,  which 
directly  undertook  that;  and  he  then  admits  that  such  a  provision 
would  be  unconstitutional,  and  that  he  has  therefore  gone  at  the 
business  in  this  indirect  and,  if  I  may  say  it,  undemocratic  sort  of 
way  in  order  to  reach  the  same  result.  If  any  Democrat  on  this  com¬ 
mittee  will  weigh  that  admission,  it  will  be  just  as  impossible  for 
him  to  vote  for  this  bill,  with  that  intent  confessed  by  its  author, 
as  it  would  be  for  him  to  vote  for  a  bill  assuming  jurisdiction  of 
petty  larceny  in  the  States ;  and  it  is  not  a  defense  of  gambling  any 
more  than  it  would  be  a  defense  of  petty  larceny  to  object  to  this 
unconstitutional  and  paternal  attempt  to  interfere  with  and  regu¬ 
late  by  Federal  enactment  the  local  affairs  of  the  several  States. 

If,  on  the  other  hand,  the  gentleman  tells  me  that  I  ought  to 
regard  it  as  a  sufficient  excuse  for  the  transaction,  that  he  expects  to 
get  revenue  from  this  measure,  I  ask  him :  “  Why  don’t  you  get  down 

and  sweep  the  other  gutters  of  life  in  order  to  raise  revenue  ?”  Why 
does  the  gentleman  omit  so  many  other  sources  of  crime  and  de¬ 
pravity  from  which  he  might  get  revenue  for  the  Government  of  the 
United  States  by  traffic  in  human  vice,  human  misery,  and  human 
weakness?  If,  Mr.  Chairman,  this  had  been  suggested  by  a  Repub¬ 
lican,  as  it  was  four  years  ago,  we  would  all  have  denounced  it  as  a 
most  immoral  and  scandalous  proposition.  If  it  had  been  proposed 
by  a  pagan  we  would  have  used  it  as  an  argument  for  standing  by 
our  foreign  missionaries  in  their  attempt  to  carry  enlightenment  to 
the  far-off  corners  of  the  world,  where  poor  degraded  wretches  were 
brought  up  with  such  sentiments  and  surroundings.  But  when  it 
comes  to  a  Christian  Democrat  [laughter],  and  he  tells  us  that  in 
order  to  interfere  with  the  local  and  criminal  jurisdiction  of  the 
States,  as  he  admits  wo  can  not  constitutionally  do,  he  will  find  an 
excuse  by  levying  a  toll  on  crime ;  I  can  only  urge  that,  remembering 
what  the  gentleman  himself  has  admitted,  you  determine  that  ques¬ 
tion  for  yourselves  when  you  come  to  vote  on  this  proposition. 

REAL  MEANING  OF  “OPTIONS.” 

In  the  second  section  are  properly  defined  the  contracts  of  agree¬ 
ment  in  general  use  in  many  lines  of  business  and  which  have 
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come  to  be  known  as  “  futures.  ”  Right  here  it  may  he  proper, 
in  view  especially  of  the  way  in  which  the  draftsman  of  this 
hill  has  used  the  term  “  option”  in  the  first  section,  and  of  the 
extent  to  which  that  word  is  frequently  used  to  designate  “  futures7' 
as  such,  to  explain  the  real  meaning  of  that  term.  For  it  should  he 
understood  that  the  numerous  references  to  “  options”  which  may 
he  seen  in  our  commercial  papers  do  not  refer  to  the  gambling 
“privileges ”  described  in  the  first  section,  hut  in  general  to  the 
legitimate  transactions  known  as  “futures.”  One  of  the  uses  of 
futures  is  this:  Millers,  factory  owners,  contractors,  and  others, 
knowing  far  in  advance  that  they  will  require  large  and  definite 
quantities  of  raw  supplies,  find  it  to  their  advantage  to  contract 
far  in  advance  for  the  delivery  of  those  supplies  at  fixed  prices, 
and  thus  to  lessen  the  risk  of  any  attempt  to  corner  the  actual 
wheat,  cotton,  or  other  product  before  they  need  it  for  use.  And 
originally  contracts  were  drawn,  for  example,  providing  for  cotton 
to  be  delivered  upon  a  definite  date  in  a  certain  month  in  the 
future.  It  was  soon  found,  however,  that  in  the  ordinary  course 
of  business  the  exact  dates  at  which  the  more  important  contracts 
became  due  were  generally  known,  and  corners  were  engineered  by 
those  wishing  to  take  advantage  of  the  situation,  which  could  be 
successful  in  their  ends — that  of  fleecing  consumer  on  the  one  hand 
and  producer  on  the  other-^-provided  the  available  stock  could  be 
carried  for  a  few  days  only,  including  the  date  at  which  the  con¬ 
tract  fell  due. 

In  order  to  avoid  this  trouble,  and  to  put  it  out  of  the  power  of 
speculators  to  corner  the  market  unless  they  were  competent  to 
carry  for  a  considerable  time  all  available  stocks,  the  following 
plan  was  devised:  Contracts  for  future  delivery  were  so  drawn  as 
to  give  to  the  seller  the  option  of  choosing,  within  a  certain  month 
named,  the  day  upon  which  he  would  deliver  the  produce  bought. 
From  that  time  on,  under  such  contracts,  with  ordinary  caution  on 
the  part  of  the  seller  it  was  practically  impossible  to  corner  any  given 
product  except  at  a  cost  and  risk  which  of  themselves  were  a  guaranty 
against  the  attempt.  A  January  option,  therefore,  does  not  mean  a 
gambling  privilege,  according  to  which  buyer  or  seller  has  the 
option  to  carry  out  or  to  repudiate  his  contract;  but  it  means  a 
definite  sale  to  a  purchaser,  who  expects  to  receive  the  produce,  by 
a  seller,  who  is  bound  to  deliver  it,  to  whom,  however,  in  order  to 
take  away  opportunities  for  cornering  the  market  by  others,  is  given 
the  option  of  choosing  the  particular  day  in  the  month  named  upon 
which  he  will  deliver  the  goods  sold.  An  “  option,”  therefore,  as 
generally  referred  to,  is  so  far  from  being  a  gambling  privilege  that 
it  is  rather  a  special  form  of  a  contract  for  future  delivery  devised 
to  reduce  the  gambling  risk  in  legitimate  business. 

EXTENT  OF  INTERFERENCE  PROPOSED. 

This  bill,  sir,  may  be  summarized  as  based  upon  two  propositions 
— both  grossly  mistaken  ones.  The  first  one  is  that  the  adminis¬ 
trative  features  are  reasonable  and  tolerable,  either  from  a  business 
or  political  standpoint.  On  this  point  I  can  characterize,  in  no 
other  way  so  completely  as  by  quoting  extracts  therefrom,  the 
utterly  ruinous  and  paternal  interference  with  the  marketing  of  our 
principal  food  products  in  which  it  is  proposed  our  Government 
shall  engage. 

Sec.  3.  That  all  “options”  and  “futures”  contracts  and  all  transfers  and  as¬ 
signments  thereof  shall  be  in  writing  and  signed  in  duplicate  by  the  parties  thereto, 
and  every  “options”  contract  shall  state  inexplicit  terms  the  time  when  the 
right  or  privilege  of  delivering,  or  the  right  of  demanding  the  delivery  of  the  arti¬ 
cle  or  articles  therein  named,  shall  expire;  and  every  “futures”  contract  shall 
state  in  explicit  terms  the  quantity  and  the  day  upon  which,  c»r  the  last  day  of  the 
1455 


■8 


Seriod  within  which,  the  article  or  articles  therein  contracted  to  be  sold  shall  be 
elivered ;  and  in  each  such  contract  the  party  so  contracting,  or  the  party  for 
whom  he  acts  as  agent,  broker,  or  employee  in  making  such  contract  to  sell  and 
deliver,  shall  state  explicitly  whether  lie  is  or  is  not,  as  the  case  may  be,  the  owner 
of  the  article  or  articles  so  contracted  to  be  sold  and  delivered,  or  has  or  has  not, 
as  the  case  may  be,  theretofore  acquired  it  or  them  by  purchase,  or  is  or  is  not,  as 
the  case  may  be,  then  entitled  to  the  right  of  the  future  possession  of  such  article 
or  articles  under  and  by  virtue  of  a  contract  for  the  sale  and  future  delivery  thereof 
previously  made  by  the  owner  thereof;  and  any  such  contract  not  including  such 
statements  and  not  so  made  and  signed  shall  be  unlawful,  but  nothing  contained 
in  this  section  shall  be  construed  to  relieve  any  person  or  dealer  in  “  options  ”  or 
“  futures  ”  from  the  penalties  and  taxes  provided  for  by  this  act. 

Sec.  4.  That  whenever  any  “options”  or  “futures”  contract  shall  be  termi¬ 
nated  by  the  absolute  sale  and  actual  delivery  of  the  raw  or  unmanufactured  cot¬ 
ton,  hops,  wheat,  com,  oats,  rye,  barley,  pork,  lard,  bacon,  dry-salted  meats,  or 
pickled  meat  embraced  in  or  covered  by  such  contract  the  person  contracting  to 
sell  and  deliver  shall  execute  a  bill  of  sale  in  which  shall  be  specified  the  number 
of  pounds  of  raw  or  unmanufactured  cotton,  hops,  pork,  lard,  bacon,  dry-salted 
meat,  and  pickled  meat,  the  nnmber  of  bushels  of  wheat,  corn,  oats,  rye,  and  bar¬ 
ley,  delivered,  together  with  the  name,  title,  or  designation,  and  place  of  business 
or  the  custodian,  and  the  serial  numbers  and  dates  of  the  acceptances,  certificates, 
receipts,  freight  or  way  bills,  or  other  vouchers  representing  the  quantity  of  each 
article  sold  and  delivered. 

Sec.  5.  That  whenever  any  “  options  ”  or  “  futures  ”  contract  shall  be  termi¬ 
nated  otherwise  than  by  absolute  sale  and  actual  delivery  of  the  raw  or  unmanu¬ 
factured  cotton,  hops,  wheat,  corn,  oats,  rye,  barley,  pork,  lard,  bacon,  dry-salted 
meat,  and  pickled  meat  embraced  in  or  covered  by  such  contract,  or  when  such 
termination  shall  be  delayed  or  postponed  beyond  the  time  designated  by  the  con¬ 
tract,  the  cancellation,  clearance,  settlement,  acquittance,  contango,  backward¬ 
ation,  privilege,  waiver,  ringing-out,  or  other  agreement  or  arrangement  by  which 
such  contract  shall  be  terminated  otherwise  than  by  absolute  sale  and  actual 
delivery  of  the  article  or  articles  embraced  therein  or  covered  thereby,  or  such 
termination  shall  be  delayed,  postponed,  or  obviated,  shall  be  executed  m  writing 
and  be  signed  in  duplicate  by  the  parties  thereto. 

Sec.  6.  That  special  taxes  are  imposed  as  follows:  Dealers  in  “options”  or 
“futures  ”  shall  pay  twelve  dollars.  Every  person  who  shall,  in  his  own  behalf 
or  as  agent,  broker,  or  employee  of  another,  as  vender  deal  in  “  options  ”  or  make, 
enter  into,  transfer,  or  assign  any  “  options  ”  contract,  or  shall  by  letter,  tele¬ 
gram,  or  other  communication  sent  from  the  United  States  to  any  foreign  country, 
or  by  an  agent,  broker,  employee,  or  partner,  resident  in  any  foreign  country,  make, 
enter  into,  transfer,  or  assign,  or  cause  to  be  made,  entered  into,  transferred,  or 
assigned,  any  “options”  contract  entered  into  or  terminated  within  the  United 
States,  shall' be  deemed  a  dealer  in  “  options;  ”  and  every  person  who  shall,  in  his 
own  behalf  or  as  agent,  broker,  or  employee  of  another  as  vender  deal  in  “fu¬ 
tures,”  or  make,  enter  into,  transfer,  or  assign  any  “futures”  contract,  or  shall 
by  letter,  telegram,  or  other  communication  sent  from  the  United  States  to  any 
foreign  country,  or  by  an  agent,  broker,  employee,  or  partner,  resident  in  any  for¬ 
eign  country,  make,  enter  into,  transfer,  or  assign,  or  cause  to  be  made,  entered 
Into,  transferred,  or  assigned  any  “  futures  ”  contract,  entered  into  or  terminated 
within  the  United  States,  shall  be  deemed  a  dealer  in  “  futures.” 

Sec.  7.  That  the  original  and  the  duplicate  of  every  “  options  ”  contract  and  of 
every  “  futures  ”  contract  shall  at  the  time  of  its  execution  have  affixed  thereto 
internal-revenue  adhesive  stamps  representing  taxes  as  follows,  namely:  For 
every  ten  thousand  pounds  or  fractional  part  thereof  of  cotton,  hops,  pork,  lard, 
bacon,  dry  salted  meat,  and  pickled  meat,  and  for  every  one  thousand  bushels  or 
fractional  part  thereof  of  wheat,  corn,  oats,  rye,  and  barley  embraced  in  or  cov¬ 
ered  by  such  contract,  one  cent.  To  each  and  every  written  or  printed  instru¬ 
ment  and  to  the  duplicate  thereof,  evidencing  any  tranfer  or  assigumennt  of  any 
“  options  ”  or  “  futures  ”  contract,  whether  such  transfer  be  by  indorsement  upon 
said  contract  and  the  duplicate  thereof,  or  by  separate  written  instrument,  there 
shall,  at  the  time  such  transfer  or  assignment  is  made,  be  affixed  internal  revenue 
adhesive  stamps  representing  taxes  as  follows :  For  every  ten  thousand  pounds 
of  raw  unmanufactured  cotton,  hops,  pork,  lard,  bacon,  dry  salted  meat,  and 
pickled  meat,  and  for  every  one  thousand  bushels  of  wheat,  corn,  rye,  oats,  and 
barley  embraced  in  or  coveredjby  the  contract,  transferred  or  assigned,  one  cent. 
Every  bill  of  sale  executed  at  termination  of  any  “  options  ”  or  “  futures  ”  con¬ 
tract  shall  have  affixed  thereto  an  internal-revenue  adhesive  stamp  of  the  denom¬ 
ination  of  two  cents. 

To  the  original  and  duplicate  of  every  cancellation,  clearance,  settlement,  acquit¬ 
tance,  contango,  backwardation,  privilege,  waiver,  ringing-out  or  other  agreement 
by  which  the  “options”  or  “futures”  shall  be  terminated  otherwise  than  by  an 
absolute  sale  and  actual  delivery  of  the  articles  embraced  in  or  covered  by  such 
contract,  or  by  which  such  termination  is  or  shall  be  delayed,  postponed,  or 
obviated,  shall  be  affixed  internal-revenue  adhesive  stamps  representing  taxes  as 
follows:  For  every  pound  of  raw  or  unmanufactured  cotton,  hops,  pork,  lard, 
bacon,  dry  salted  meat,  and  pickled  meat  embraced  in  or  covered  by  such  con- 
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tract,  one  cent;  for  every  bushel  of  wheat,  three  cents,  and  for  every  bushel  of 
corn,  oats,  rye,  and  barley  embraced  in  or  covered  by  such  contract,  two  cents. 
Every  “options”  contract  that  shall  expire  by  limitation  without  an  absolute  sale 
and  actual  delivery  of  the  article  or  articles  embraced  in  or  covered  by  such  con¬ 
tract,  shall,  at  the  time  designated  by  such  contract  for  its  expiration,  have 
affixed  to  the  copy  thereof,  which  shall  be  retained  by  the  vendor  therein  named, 
internal-revenue  adhesive  stamps  representing  taxes  as  follows :  For  every  pound 
of  raw  or  unmanufactured  cotton,  hops,  pork,  lard,  dry  salted  meat  and  pickled 
meat  embraced  in  or  covered  by  such  contract,  one  cent;  for  every  bushel  of 
wheat,  three  cents,  and  for  every  bushel  of  corn,  oats,  rye,  and  barley  covered 
by  such  contract,  two  cents. 

Sec.  8.  That  every  person  engaged  in  or  intending  to  be  engaged  in  the  busi¬ 
ness  of  a  dealer  in  “options  ”  or  of  a  dealer  in  “ futures  ”  shall,  before  commenc¬ 
ing  or  continuing  such  business,  give  notice  in  writing,  subscribed  by  him,  to  the 
collector  of  internal  revenue  for  the  district  wherein  such  business  is  to  be  carried 
on,  stating  his  name,  residence,  and  if  a  company  or  firm  the  name  and  residence 
of  each  member  thereof,  the  name  and  residence  of  every  person  interested  or  to 
be  interested  in  such  business,  the  principal  place  where  such  business  is  to  be 
carried  on,  and  whether  of  dealing  in  “options”  or  “futures,”  or  both,  and  if 
such  business  is  to  be  carried  on  in  a  city,  the  residence  and  place  of  business 
shall  be  designated  by  the  name  of  the  street  and  number  of  the  building;  and  if 
the  whole  building  is  not  occupied,  the  number  or  other  designation  of  each  story 
and  the  number  and  other  designation  of  each  room  so  occupied  or  to  be  occupied. 
Every  person  intending  to  commence  or  continue  the  business  of  a  dealer  in 
“options  ”  or  of  a  dealer  in  “  futures  ”  shall,  on  filing  with  the  collector  of  inter¬ 
nal  revenue  his  notice  of  such  intention  and  before  proceeding  with  such  busi¬ 
ness,  and  on  the  first  secular  day  of  July  of  each  succeeding  year,  execute  a  bond 
in  the  form  prescribed  by  the  Commissioner  of  Internal  Revenue  and  approved 
by  the  Secretary  of  the  Treasury,  conditioned  that  he  shall  faithfully  comply  with 
all  the  provisions  of  law  relating  to  the  duties  and  business  of  a  dealer  in 
“  options”  ora  dealer  in  “futures,  as  the  case  may  be,  and  shall  pay  all  taxes 
due  and  all  penalties  incurred  or  fines  imposed  on  him  for  a  violation  of  any  of 
said  provisions.  Said  bond  shall  be,  with  at  least  two  sureties,  approved  by  the 
collector  of  the  district,  and  fora  penal  sum  of  three  thousand  dollars.  Nothing 
in  this  act  shall  be  construed  to  require  more  than  one  permit  to  or  bond  from 
any  person  dealing  in  “futures”  contracts,  nor  to  prevent  a  change  of  the  prin¬ 
cipal  place  of  business  of  such  dealer  in  “  futures  ”  by  first  giving  notice  thereof 
t©  said  collector. 

Sec.  9.  That  it  shall  be  the  duty  of  every  dealer  in  “  options  ’■  or  “  futures  ”  to 
keep  at  his  said  principal  place  of  business  a  book  in  which  shall  be  recorded,  on 
the  day  of  its  execution,  the  date  of  each  and  every  “options”  or  “futures” 
contract  made,  entered  into,  transferred,  or  assigned  by  such  dealer,  in  his  own 
behalf  or  in  behalf  of  another  or  others,  also  the  name  and  residence  and  place  of 
business  ot  the  parties  to  the  contract  or  to  whom  transferred  or  assigned,  the 
kind  and  quantity  of  the  article  or  articles  embraced  in  or  covered  by  each  such 
contract,  the  day  when  or  the  last  day  of  the  time  within  which  the  right  or  priv¬ 
ilege  of  delivering  or  of  demanding  the  delivery,  as  the  case  may  be.  of  such 
article  or  articles  as  are  embraced  in  or  covered  by  any  “  options  ”  contract  shall 
expire,  and  the  day  when  or  the  designated  period  within  which  delivery  shall  be 
made  of  the  article  or  articles  embraced  in  or  covered  by  any  “  futures  ”  contract, 
and  said  dealers  shall  enter  in  such  book  such  other  particulars  as  the  Commis¬ 
sioner  of  Internal-Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury, 
shall  prescribe.  All  contracts  executed  during  the  fiscal  year  shall  be  numbered 
consecutively,  commencing  with  number  one  for  the  first  contract  executed  on  or 
after  the  first  day  of  July,  and  no  two  or  more  contracts  made  during  the  same 
fiscal  year  by  the  same  dealer  shall  have  the  same  whenever  any  “options”  or 
“futures”  contract  shall  be  terminated  by  the  sale  and  delivery  of  the  article  or 
articles  embraced  in  or  covered  by  such  contract,  the  bill  of  sale  shall  be  numbered 
to  correspond  with  the  number  of  the  contract  and  recorded  in  the  book  with 
name,  title,  or  designation  and  place  of  business  of  the  custodian  and  serial  num¬ 
bers  and  dates  of  the  acceptances,  certificates,  receipts,  freight  or  waybills,  or 
other  vouchers  representing  the  quantity  of  each  article  so  sold  and  delivered. 
Whenever  any  “options”  or  “futures”  shall  be  terminated  otherwise  than  by  an 
absolute  sale  and  an  actual  delivery  of  the  article  or  articles  embraced  in  or  covered 
by  the  contract,  or  the  termination  thereof  shall  be  delayed  or  post  poned  beyond 
the  time  fixed  by  the  contract  the  cancellation,  clearance,  settlement,  acquittance, 
contango,  backwardation,  privilege,  waiver,  ringing  out,  or  other  agreement  or 
arrangement  by  which  the  “options”  or  “futures”  is  so  terminated,  delayed, 
postponed,  or  obviated,  shall  be  numbered  to  correspond  with  the  number  of  the 
contract  and  recorded  in  the  book  as  in  the  case  of  a  bill  of  sale  where  the  termina- 
ation  is  by  absolute  sale  and  actual  delivery.  Such  book  shall  at  all  times  be  kept 
in  the  dealer’s  place  of  business  and  shall  be  subject  to  inspection  by  the  collector 
or  deputy  collector  of  internal  revenue  or  by  any  duly  authorized  internal-revenue 
agent  who  may  make  memoranda  or  transcripts  therefrom.  And  such  further 
particulars  shall  be  entered  in  such  book  as  maybe  prescribed  by  the  Commis¬ 
sioner  of  Internal  Revenue  and  approved  by  the  Secretary  of  the  Treasury.  It 
1456 


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shall  be  the  duty  of  every  person  required  to  keep  the  book  provided  for  in  this 
section  to  matye  a  return  monthly  to  the  collector  of  internal  revenue  for  the 
district  in  which  any  “options”  or  “futures”  contracts  required  to  be  entered 
into  such  book  shall  be  made,  transferred,  or  assigned.  The  first  return  shall  be 
made  on  the  first  secular  day  of  the  month  next  succeeding  the  date  of  commenc¬ 
ing  business,  or  within  five  days  thereafter,  and  returns  shall  be  made  on  the  first 
secular  day  of  every  subsequent  month  or  within  five  days  thereafter.  Each 
return  shall  be  under  oath  and  in  such  form  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury,  shall  prescribe,  and 
shall  show  each  “options  ”  and  “futures  ”  contract  made  or  entered  into  or  trans¬ 
ferred  or  assigned  by  such  person  in  his  own  behalf  or  in  behalf  of  others  during 
the  preceding  mon  tn,  together  with  all  the  particulars  relative  to  such  contract 
as  are  shown  by  the  record,  or  which  may  be  required  by  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury. 

In  the  quotations  I  have  just  given  I  have  noted  only  those  pro¬ 
visions  which  the  vender  himself  is  obliged  tb  carry  out.  Other 
sections  provide  for  a  most  complex  and  obtrusive  system  of  Gov¬ 
ernment  espionage  and  a  highly  specialized  system  of  penalties  and 
criminal  law  to  enforce  the  act,  so  that  to  the  pestering  of  individu¬ 
als  it  is  proposed  to  add  the  multiplication  of  Federal  officers  and 
the  elaboration  of  criminal  law  appropriately  devised  as  a  part  of 
the  new  system  of  interference  and  espionage  proposed  by  the  bill. 

There  is  no  parallel  in  the  world  for  such  officious  intermeddling, 
except  in  some  of  the  tyrannical  governments  of  Europe,  where 
certain  vices,  being  under  police  supervision,  are  looked  after  as 
carefully  as  my  friend  from  Missouri  proposes  to  look  aftef  the 
marketing  of  American  produce. 

Mr.  CANNON  of  Illinois.  Has  the  gentleman  any  idea  how  many 
thousand  internal-revenue  deputies  would  be  required? 

Mr.  WARNER.  The  bill  if  enacted  must  fall  by  its  own  weight. 
No  human  being  can  do  business  if  there  are  enough  deputies  about 
his  door  to  keep  track  of  what  he  is  doing  under  this  bill,  and  no- 
self-respecting  human  being  will  do  business  with  the  prospect  of 
such  espionage  as  is  here  contemplated. 

A  great  many  years  ago  it  was  recognized  that  although  there 
might  be  tares  in  the  wheat  field,  yet  it  would  be  better  to  leave 
them  grow  together  until  the  harvest.  But  my  friend  from  Mis¬ 
souri  [Mr.  Hatch]  introduces  a  new  principle.  He  says:  “No,  I 
do  not  believe  in  pulling  up  the  tares;  that  may  hurt  the  wheat. 
All  I  propose  to  to  do  is  to  pinch  each  blade  of  wheat  as  it  comes 
up,  so  that  if  to  my  enlightened  thumb  it  feels  like  a  tare  I  can 
put  it  down  in  my  books”;  and  it  would  he  just  as  possible  to 
make  a  success  of  wheat-raising  under  those  conditions  as  to 
attempt  to  do  business  in  the  marketing  of  American  produce 
under  the  conditions  prescribed  by  my  friend  from  Missouri  [Mr. 
Hatch].  Mark  you,  the  gentleman  in  his  present  report  explains 
that  he  is  not  against  legitimate  speculation.  He  explains  that 
only  a  few  of  the  members  upon  any  of  the  exchanges — except  the 
two  wicked  ones,  the  cotton  exchanges  of  New  York  and  New 
Orleans— do  much  in  this  line.  Mind  you  that,  therefore,  in  order 
to  meet  what  he  himself  not  merely  confesses  but  demonstrates  is 
an  infinitesimal  proportion  of  the  business  of  this  country,  he  pro¬ 
poses  to  stick  his  intermeddling  hands  into  every  legitimate  trans¬ 
action. 

“ringing  out.” 

It  is  perhaps  to  the  credit  of  my  friend  from  Missouri  that  the 
provisions  of  his  bill  demonstrate  his  unfamiliarity  with  such  leg¬ 
islation.  It  would  be  easy  to  take  up  section  after  section  and  show 
its  absurdity.  A  single  instance  must,  however,  suffice  her°..  By 
section  7  a  penalty  is  provided  for  any  “  ringing  out”  of  contracts 
for  future  delivery. 

What  my  friend  from  Missouri  fails  to  appreciate  is  that  the 
“evasion”  which  he  proposes  to  punish  so  severely  is  not  an  evasion 
1455 


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of  fulfilment  of  contracts  which  have  been  made,  but  simply  an 
avoidance  of  unnecessary  trouble  and  expense  in  carrying  them  out. 

The  process  of  ringing  out  is  not  a  substitute  for  actually  fulfill¬ 
ing  a  contract,  but  simply  an  expedient  to  avoid  extra  expense  and 
trouble  in  fulfilling  it.  The  “  ringing  out”  is  exclusively  an 
arrangement  by  which  brokers  in  providing  for  their  numerous 
customers  do  so  at  the  least  expense  to  themselves.  For  example, 
supposing  that  my  friend  from  Missouri  should  to-day  order  me  at 
New  York  to  purchase  him,  for  shipment  to  Europe  in  November,  a 
boat  load — or  8,000  bushels — of  wheat  at  $1  per  bushel,  and  sup¬ 
posing  that  two  weeks  afterward  my  friend  from  Georgia  should 
instruct  me  to  sell  for  him  at  98  cents  per  bushel  a  boat  load  of 
wheat  deliverable  at  New  York  in  November.  Having  placed  both 
these  contracts  on  change,  it  is  not  improbable  that  before  their 
maturity  they  may  have  both  gotten  into  the  hands  of  a  single 
broker  who,  discovering  that  he  is  obliged  to  receive  from  me  a 
boat  load  of  wheat  in  November  and  also  deliver  to  me  the  same 
amount  in  the  same  month,  notifies  me  of  the  fact  and  suggests 
that  he  is  ready  to  receive  the  difference  in  price,  and  to  consider 
the  contracts  as  “  rung  out,”  that  is  to  say,  that  together  they  have 
made  a  circle  or  ring,  and  met  and  canceled  each  other.  In  other 
words,  “ singing  out”  is  simply  an  adjustment  between  brokers  to 
save  the  cost  of  transferring  produce  back  and  forth.  The  cus¬ 
tomer  has  nothing  whatever  to  do  with  it.  The  man  who  bought 
the  grain  will  receive  it  in  November  as  he  stipulated  for.  The  man 
who  sold  the  grain  will  have  to  deliver  it  as  he  stipulated  for.  The 
only  difference  is  that,  instead  of  each  broker,  through  whose  hands 
the  contracts  have  passed,  being  compelled  to  attend  to  both  the 
receipt  and  delivery  of  the  grain,  it  has  been  arranged  between  them 
that  there  should  be  but  one  receipt  and  delivery,  and  that — since 
these  can  be  most  easily  attended  to  by  the  one  who  has  both  to 
receive  and  deliver  the  same  amount — that  all  others  interested  shall 
be  excused  from  bothering  themselves  with  it.  The  result  is  simply 
so  much  less  trouble  in  handling  grain  and  so  much  less  of  cost  to 
come  between  the  producer  and  consumer.  There  is  nothing  of 
gambling  about  it  at  all,  and  it  is  simply  one  of  the  methods  by 
which  business  is  facilitated. 

In  practice,  among  the  hundreds  and  even  thousands  of  members 
associated  upon  an  exchange,  these  opportunities  for  cancellation 
naturally  occur  as  a  result  of  a  series  of  contracts  rather  than  of  a 
simple  interchange  between  two  brokers.  In  every  great  exchange 
firm  there  is  therefore  some  clerk  whose  business  it  is  to  keep  track 
of  all  their  contracts,  both  bought  and  sold,  and,  whenever  possible 
to  do  so,  to  obviate  expense  of  mutual  receipt  and  delivery  by 
interchanging  against  each  other  corresponding  contracts  for  pur¬ 
chase  and  sale — -the  saving  of  time  and  expense  being  simply  enor¬ 
mous  and  absolutely  essential  to  enable  expense  of  handling  produce 
contract  to  be  kept  at  a  point  sufficiently  low  to  make  them  attrac¬ 
tive  for  temporary  investments.  It  is  true  that  upon  these  can¬ 
cellations  differences  are  paid  in  cash.  This  again,  however,  is 
neither  gambling  nor  has  it  anything  to  do  with  the  purchaser  or 
seller.  It  is  simply  a  case  where  a  broker,  by  the  rules  of  his 
exchange  responsible  for  his  customers,  finding  that  in  dealings 
with  another  broker  he  is  obligated  to  receive  money  for  the  credit 
of  a  customer,  and  to  pay  out  money  for  the  account  of  another  custo¬ 
mer, simply  sends  or  receives  the  balances  between  the  two  amounts. 

A  MEMBER.  How  about  “contango”? 

Mr.  WARNER.  I  will  say  that  “contango”  is  not  particularly 
wicked.  T.t  is  not,  however,  the  same  transaction  as  “ringing  out.” 
It  is  a  way  temporarily  to  postpone  settlement. 

1455 


12 


Mr.  WALKER.  It  is  the  same  kind  of  a  transaction. 

Mr.  WARNER.  It  is,  in  a  way,  similar,  but  not  the  identical 
transaction  involved  in  “ringing  out.” 

Mr.  PATTERSON.  What  is  that  transaction? 

Mr.  WARNER.  It  is  an  arrangement  for  postponing  delivery  of 
goods  purchased.  I  have  heard  it  most  frequently  used  with  ref¬ 
erence  to  the  public  securities  of  different  countries.  I  do  not  see 
any  reason  why  it  should  not  apply  to  produce,  but  it  is  not  gen¬ 
erally  used  in  that  way ;  at  least  I  have  not  frequently  so  heard  it. 

Mr.  HALL  of  Missouri.  If  I  understand  you  the  ringing-out  pro¬ 
cess  is  simply  a  clearing-house  process. 

Mr.  WARNER.  That  is  all.  The  whole  business  is  simply  and 
purely  one  of  clearing-house  methods  adjusted  to  the  complex  re- 
relation  of  contracts  involving  produce  as  well  as  money ;  the  reasons 
for  the  methods  adopted,  the  economies  in  their  use,  and  the  facili¬ 
ties  given  to  the  advantage  ot  all  concerned,  and  the  utter  lack 
of  effect  except  to  reduce  the  expense  of  doing  his  business  upon 
the  contractor  or  contractee  being  precisely  the  same  as  in  the 
case  of  a  clearing-house  in  its  relations  to  banks  and  their  individ¬ 
ual  depositors.  A  bank  depositor  draws  a  check  addressed  to  his 
bank  requiring  the  payment  to  a  certain  individual  of  a  certain 
amount  of  money.  This  particular  thing  is,  however,  one  of  the 
most  rare  of  occurrences.  What  the  person  does  is  to  deposit 
that  check  in  his  bank,  requesting  its  payment  to  such  bank. 
What  that  bank  does,  however,  is  not  to  present  that  check,  but  t© 
turn  it  into  the  clearing-house ;  and  what  the  clearing-house  does 
is  not  to  present  the  check,  but  to  add  it  with  hundreds  of  other 
checks  against  the  bank  in  question  and  offset  it  by  the  equally 
numerous  credits  in  favor  of  the  bank  in  question,  and  as  a  result 
receive  from  one  or  another  of  its  members,  and  pay  to  one  or  an¬ 
other  of  its  members,  a  balance,  infinitesimal  as  compared  with 
the  total  amount  of  its  transactions,  and  having  no  special  ref¬ 
erence  to  anyone  of  them — this  without  in  the  slightest  degree 
affecting  the  relations  of  any  of  its  associated  banks  with  their 
customers,  whose  accounts  are  kept  in  precisely  the  form  that  would 
be  the  case  were  the  primitive  method  of  settling  each  check  by 
payment  in  cash  at  the  bank  upon  which  it  was  drawn  in  actual 
vogue. 

I  was  about  to  say  that  it  would  be  just  as  sensible  to  fine  every 
drawer  of  a  check  for  permitting  it  to  be  paid  through  the  clear¬ 
ing-house.  This,  however,  Mr.  Chairman,  would  be  an  understate¬ 
ment,  for  the  check  involves  money  transactions  alone.  The 
multitudinous  contracts  thus  “cleared”  by  the  “ringing-out” 
process  involves  each  the  handling  of  enormous  bulks  of  stored  prod¬ 
uce  as  well  as  the  handling  of  the  money  involved.  And,  therefore, 
when  my  friend  from  Missouri  proposes  a  penalty  for  the  ringing- 
out  of  contracts  this  is  much  worse  than  if  heshould  forbid  any  check 
to  be  settled  otherwise  than  by  separate  payment  in  cash  at  the 
teller’s  window,  as  is  the  handling  of  a  boat  load  of  wheat  more 
onerous  than  the  carrying  about  of  a  check.  The  utter  igno¬ 
rance,  not  merely  of  the  conditions  with  which  he  is  dealing, 
but  of  the  most  common  expedients  of  permitting  business  to  be 
done  in  a  civilized  way,  is  the  only  excuse  which  my  friend  can 
urge.  If  he  were  to  be  charged  with  the  intent  to  accomplish  what 
his  proposition  would  actually  do  if  carried  out,  he  would  become 
an  outlaw  to  be  abated  as  an  Apache  or  a  dynamiter.  Of  course,  I 
appreciate  that  he  intends  no  such  attack  upon  commerce.  Such, 
however,  is  practically  the  attitude  in  which  this  bill  places  him, 
and  the  consideration  to  which,  if  he  is  to  be  takmi  seriously,  the 
commercial  world  must  consider  him  entitled. 

1455 


13 


/ 


THEORY  THAT  ‘-FUTURES”  ARE  WRONG. 

The  second  theory  on  which  this  bill  is  based  is  that  deals  for  future 
delivery  are  immoral,  and  hence  that  any  interference  with  them  is 
presumably  a  good  thing  for  the  farmer  and  probably  for  every  one 
else. 

THE  OBJECT  OF  “FUTURES,” 

As  to  this,  I  believe  the  real  trouble  to  be  that  our  friends  are 
either  unacquainted  with  the  nature  of  the  transactions  with  which 
they  propose  to  deal,  or  on  the  other  hand,  forgetful  of  the  condi¬ 
tions  under  which  commerce  and  business  have  developed.  I  am  led 
to  these  conclusions  by  the  suggestion  still  frequently  made,  though 
not  as  often  as  it  was  two  years  ago,  as  in  the  mind  of  the  speaker 
a  conclusive  answer  to  any  defense  of  the  contracts  called  futures, 
viz :  That  they  are  plainly  an  attempt  on  the  part  of  a  person  to 
sell  what  hedoesnot  own.  That  is  an  entirely  correct  description, 
Mr.  Chairman,  one  with  which  I  shall  not  for  a  moment  quarrel; 
and  it  is  j  ust  because  such  is  their  nature  that  the  business  of  dealing 
in  futures  is  a  natural  and  beneficent  one,  and  will  become  more  ex¬ 
tended  and  more  beneficent  as  our  civilization  develops  and  the  pro¬ 
cesses  of  production  and  distribution  become  perfected  as  to  one 
after  another  of  our  great  staples.  To  the  extent  that  dealings  in 
futures  are  substituted  for  what  is  known  as  spot  trausactiohs  is 
the  gambling  element  eliminated  from  the  business  involved,  the 
effect  being  in  each  case  to  relieve  the  one  who  participates  in  each 
stage  of  the  transactions  involved  from  all  speculative  risks  except 
that  particular  one  which,  it  being  his  special  busness  to  estimate, 
is  for  him  legitimate  and  for  any  one  else  would  be  illegitimate. 

Let  me  explain.  If  a  jackal  wants  a  shelter,  he  goes  into  a  con¬ 
venient  cave.  If  a  ground  hog  wants  one,  with  somewhat  more  of 
intelligence  directed  to  that  particular  object,  he  digs  him  a  hole. 
If  a  savage  feels  similar  need,  with  still  advancing  use  of  intellect, 
he  puts  together,  or  makes  his  wife  do  so,  the  materials  of  which 
his  rude  hut  is  constructed;  or  if  he  is  a  great  chief  and  wants  a 
bigger  one  he  causes  to  be  brought  together  the  material,  and  when 
he  has  gotten  them  they  are  fashioned  and  put  together  as  he  may 
order.  If,  however,  a  civilized  man  wants  a  house,  about  the  last 
thing  he  does — or  about  the  first  thing  he  is  sorry  for  if  he  does  do 
it — is  to  purchase  the  lumber,  the  stone,  and  the  brick,  and  then 
hire  the  men  to  put  up  the  house  himself.  The  reason  is  plain.  In 
direct  proportion  as  we  take  advantage  of  civilized  condition  we 
have  to  deal  with  a  greater  and  greater  proportion  of  matters  as  to 
which  no  man  can  be  an  expert  in  more  than  one,  and  the  man  who 
undertakes  to  be  his  own  architect  and  carpenter  and  to  serve  him¬ 
self  as  contractor  in  every  branch  required  for  housebuilding  is 
simply  taking  in  each  case  a  gambling  risk  about  which  he  can 
know  little  or  nothing.  What  he  does  do,  however,  is  to  go  to  a 
builder  whose  special  business  it  is  to  arrange  for  the  erection  of 
houses  in  that  locality  and  he  contracts  with  that  builder  for  his 
house — in  other  words,  he  buys  a  future  in  houses,  deliverable  six 
months,  or  a  year,  or  two  years  hence. 

Mr.  PENCE.  And  what  if  he  does  not  deliver  the  house? 

Mr.  WARNER.  If  for  any  reason  he  dues  not  want  the  house,  or 
he  wants  a  different  or  better  house,  or  if  for  any  reason  the  two 
parties  concerned  come  to  a  different  conclusion  than  they  at  first 
contemplated,  this  beneficent  Government — up  to  date — allows  them 
to  attend  to  their  own  business. 

It  is  not  assumed — it  generally  is  not  the  fact — that  the  building 
contractor  has  a  single  foot  of  the  timber,  a  single  one  of  the  stones, 
a  single  thousand  of  the  brick,  or,  indeed,  any  of  the  material  that 
he  thus  sells  in  the  shape  of  a  future  in  houses. 

1455 


14 


No  one,  however,  won!  d  claim  that  this  is  a  gambling  transaction ; 
every  one,  on  the  contrary,  would  appreciate  that,  so  far  from  a 
gambling  transaction,  it  was  a  legitimate  process  by  which  what 
would  have  been  a  speculative  risk  in  the  man  who  wanted  the 
house,  but  who  knew  nothing  about  building,  was  transferred,  to 
his  great  advantage,  to  a  contractor  who  could  legitimately  assume 
the  risk  in  question,  for  the  very  good  reason  that  it  was  his  par¬ 
ticular  business,  in  which  he  had  carefully  trained  himself,  so  as  to 
make  the  contract  for  him  a  legitimate  business  transaction.  This, 
however,  is  only  the  first  step.  The  contractor  himself  is  not  equally 
an  expert  in  carpentry  and  mason  work,  in  plumbing  and  gas-fitting, 
and  decoration,  exterior  and  interior.  He,  in  turn,  having  made  a 
contract  for  the  future  delivery  of  a  house,  calls' in  several  trades¬ 
men,  each  most  conversant  with  the  particular  branch  with  which 
he  is  to  deal,  and  the  general  contractor  buys  of  one  a  future  in 
masonry,  of  another  a  future  in  carpenter  work,  of  another  a  future 
in  plumbing  and  gas-fitting,  of  another  a  future  in  painting.  And  no 
one  knows  better  than  himself  that  no  one  of  these  has  on  hand  a 
single  item  of  the  work  he  thus  contracts  to  deliver.  But,  just  as 
the  owner  ^recognizes  the  contractor  as  a  man  who  can  undertake 
the  general  risk  for  him  much  more  cheaply  and  much  more  legiti¬ 
mately  than  he  could  undertake  it  for  himself,  just  so  the  contractor 
recognizes  each  one  of  these  several  tradesmen  as  one  who  can  under¬ 
take  in  his  specialty  much  more  cheaply  and  much  more  legiti¬ 
mately  than  can  he  the  special  risk  involved. 

Not  merely  the  articles  mentioned  in  this  bill,  but  iron,  copper, 
tin,  cotton  goods,  butter,  cheese,  coffee,  freights,  and  exchange  are 
regularly  contracted  for  long  in  advance  by  those  who  are  thus 
enabled  to  make  definite  provisions  for  the  particular  industry  in 
which  they  are  engaged.  Lines  of  cloths  are  sold  in  the  same  way 
long  before  their  manufacture.  Building  materials  are  thus  con¬ 
tracted  for  long  before  the  timber  is  hewn  or  the  clay  dug.  That 
the  gentlemen  who  are  pressing  this  bill  have  not  heard  of  these 
futures  and  do  not  provide  against  them  sinxply  shows  how  little 
are  they  acquainted  with  the  universal  tendency  of  civilized  busi¬ 
ness.  That  they  have  selected  the  cases  which  are  best  known  and 
most  universally  practiced  simply  shows  to  me,  sir,  that  in  their 
misinformation  they  have  so  drawn  their  bill  as  to  apply  it  to  the 
very  cases  in  which,  on  account  of  the  market  being  universal  and 
the  information  as  to  the  supply  and  demand  being  most  easily  and 
most  promptly  secured,  the  possible  good  to  be  done  by  such  a  bill, 
even  upon  their  own  assumption,  is  the  least,  and  the  certain  inter¬ 
ference  in  legitimate  business  the  greatest  possible.  Indeed,  the 
future  system  is  being  gradually  extended  to  cover  every  product 
in  regard  to  which  practical  methods  of  grading  and  preservation 
are  devised ;  and  in  every  quarter  where  this  has  not  already  been 
accomplished  the  ingenuity  of  intelligent  producers  and  dealers  is 
exercised  toward  the  solution  of  the  problem.  It  is  the  universal 
experience  that  in  proportion  as  the  grading  of  a  product  can  be 
perfected  and  the  dealing  in  it  systematized  is  the  economy  with 
which  it  can  be  handled  between  its  production  and  ultimate  use 
to  the  equal  advantage  of  the  one  who  produces  it  and  the  one  by 
whom  it  is  finally  consumed. 

ILLUSTRATION  PROM  COTTON  TRADE. 

Now  take  the  case  of  the  cotton  manufacture.  I  can  not  but  feel 
that  the  theory  upon  which  this  bill  is  drawn  is  that  the  cotton 
manufacturer,  when  he  finds  he  wants  cotton,  takes  a  cart  and  goes 
around  and  buys  it  of  the  planter,  takes  it  to  his  mill,  weaves  it 
into  cloth,  and  then  takes  the  cloth  and  carts  it  about,  seeking  some 
one  to  whom  he  may  sell  it.  This  does  approach  the  primitive — 
1455 


I 


15 


the  barbaric — method  of  doing  this  kind  of  business;  and  it  is  but 
fair  to  admit  that  under  such  circumstances  there  would  be  no 
trouble  about  dealings  for  future  delivery.  Such,  however,  as  every¬ 
one  knows,  is  not  the  case  at  present.  The  business  of  cotton  plant¬ 
ing,  of  cotton  marketing,  of  cotton  manufacturing,  and  of  distribu¬ 
tion  of  cotton  goods  is  in  each  case  a  highly  specialized  industry, 
capable  of  engrossing  all  the  enterprise,  intelligence,  and  tact  of 
any  man,  and  as  to  which  no  prudent  man  wishes  to  undertake  more 
than  one  at  a  time.  In  the  case  of  the  manufacturer,  for  exam¬ 
ple,  the  one  thing  with  which  he  is  conversant  is  manufacturing — 
the  process  by  which,  the  cost  at  which,  the  time  within  which, 
given  the  material  ready  for  his  use,  he  can  produce  the  cloth  ready 
for  sale.  He  does  not  know  anything  about  cotton-raising.  And 
it  would  be  impossible  for  him  to  keep  track  of  the  relations  between 
the  supply  and  the  demand  of  cotton,  the  development  of  transport 
and  commercial  facilities,  and  all  the  other  data  that  are  included 
within  the  province  of  the  cotton  dealer.  He  is  equally  unac- 
quaintedwith  the  methods  by  which  through  wholesaler  and  jobber 
and  retailer,  in  accord  with  the  varying  demands  arising  from 
varying  conditions,  his  goods  must  be  marketed  to  the  ultimate 
consumer.  What  he  does  know,  and  the  only  thing  it  is  safe  for 
him  to  depend  upon  knowing,  is  the  process  of  manufacture.  The 
risks  involved  in  this  are  the  ones  which  it  is  his  legitimate  busi¬ 
ness  to  assume,  for  the  precise  reason  that  he  appreciates  and  can 
handle  them  better  than  anybody  else,  so  that  what  to  anyone  else 
would  be  a  mere  gambling  venture  is  to  him  a  business  enterprise. 
How  does  he  do  this? 

In  general,  as  you  know,  the  process  is  about  as  follows:  The 
manufacturer  is  without  capital  except  a  small  margin  above  that 
sufficient  to  enable  him  to  run  his  factory.  He  goes  to  the  factor 
at  New  York,  Boston,  or  Philadelphia — the  man  who  is  specially 
versed  in  the  methods  of  distribution  of  cotton  goods.  He  consults 
with  him  as  to  the  kind  of  goods  for  which  there  will  probably  be 
a  good  demand  in  the  near  future  and  as  to  the  prices  at  which 
these  goods  can  probably  be  marketed.  He  selects  those  as  to  which 
his  experience  suggests  he  can  most  surely  make  a  profit,  and  there¬ 
upon  contracts  with  his  factor  somewhat  in  this  wise :  The  mill 
owner  contracts  to  deliver  to  the  factor,  say,  10,000  pieces  of  goods 
per  month  for  twelve  months,  commencing  three  months  in  the 
future,  and  the  last  delivery  being  fifteen  months  off.  In  turn,  the 
factor  contracts  to  advance  funds  to  the  mill  owner  from  month  to 
month  at  a  rate  not  to  exceed  a  certain  rate  per  yard  or  per  piece  of 
the  goods  to  be  delivered,  to  market  the  whole  product  as  advan¬ 
tageously  as  possible,  and  to  render  an  account  at  certain  dates,  in¬ 
terest  being  charged  and  paid  at  a  certain  fixed  and  generally  mod¬ 
erate  rate.  There  is  now  left  for  the  mill  owner  but  one  factor  of 
anxious  uncertainty  in  the  situation.  As  to  the  manufacturing,  he 
understands  perfectly  its  different  conditions,  and  as  the  price  of 
cotton  then  rules,  he  knows  there  is  a  fair  margin  for  safety  and 
profit  in  the  transaction.  The  price  of  cotton,  however,  may  vary 
by  25  or  40  per  cent  in  the  course  of  the  year.  It  is  something 
which  he  is  utterly  powerless  to  influence. 

After  all  these  arrangements  noted  are  made,  he  is  still  in  a  position 
in  which,  while  a  material  reduction  in  the  price  of  cotton  may  add 
greatly  to  his  profit,  a  sharp  rise  in  this  price  may  bring  certain 
ruin.  Should  he  go  on  under  these  conditions  his  business  is  specu¬ 
lative,  risky,  illegitimate.  There  are  just  two  ways  in  which  he 
can  avoid  this:  He  can  buy  at  once,  by  spot  contract,  the  whole 
amount  of  cotton  he  will  need  for  the  next  fifteen  months,  thereby 
necessitating  the  use  of  an  enormous  capital  and  excessive  expense 
1455 


10 

for  interest,  storage,  handling,  and  insurance;  or,  going  into  the 
market,  he  can  buy  cotton  in  such  amouuts  as  he  shall  estimate  he 
will  need  for  delivery  month  by  month  in  the  future.  His  expe¬ 
rience  has  taught  him  that  the  grades  which  are  near  the  standard 
grade  vary  with  such  exactness  in  proportion  as  does  the  price  of 
that  grade,  that  he  need  not  concern  himself  as  to  the  precise  grade 
he  wishes ;  but  that  by  making  a  present  contract  for  future  deliv¬ 
ery,  month  by  month  as  he  estimates  he  will  need  the  cotton,  of  a 
sufficient  quantity  of  a  standard  grade,  he  can,  on  any  month  when 
such  contracts  mature,  secure  any  marketable  grade  above  or  below 
that  standard  by  simply  paying  the  difference,  if  what  he  wants  is 
a  better  quantity  than  the  standard,  or  by  realizing  the  difference 
in  case  the  cotton  he  wishes  to  use  is  of  a  poordr  quality. 

In  other  words,  by  the  system  of  dealing  in  futures  the  cotton 
manufacturer  is  enabled  to  do  his  business  with  but  a  small  propor¬ 
tion  of  the  capital  he  would  otherwise  need,  and  to  do  it  upon  a 
profit  margin  much  smaller  than  would  be  necessary  if  he  was 
obliged  either  to  take  the  gambling  risk  involved  in  waiting  until 
he  needed  the  cotton  before  he  contracted  for  it,  or,  on  the  other 
hand,  in  keeping  idle  the  money  and  meeting  the  expense  involved 
in  the  purchase  and  holding  of  the  enormous  amount  of  cotton 
required.  And  I  need  not  add  that  in  proportion  to  the  cheapness 
with  which  the  manufacture  can  thus  be  carried  on,  the  smallness 
of  the  margin  which  manufacturers  are  willing  to  accept,  the  induce¬ 
ments  which  are  thus  given  manufacturers  by  relieving  them  from 
all  risks  except  the  one  which  they  are  specially  qualified  to  under¬ 
take,  is  the  manufacture  of  cotton  encouraged,  the  margin  between 
the  cost  of  the  product  and  the  cost  of  the  raw  cotton  cheapened, 
the  consumption  increased,  and  the  demand  for  and  the  price  of  the 
planters’  product  increased. 

To  subject  such  deals  to  the  provisions  of  this  bill  not  merely 
involves  a  harassing  trouble  and  expense,  but — since  there  is  no 
necessary  contract  relation  between  the  deals  in  standard  grade  he 
has  thus  made  for  future  delivery,  and  his  actual  purchases  of  spe¬ 
cial  grade,  when  he  comes  to  need  them — the  manufacturer  would 
be  subjected  to  all  the  pains  and  penalties  provided  by  this  bill  for 
gambling  transactions.  The  only  alternatives  would  be  such  addi¬ 
tional  complexity  in  the  bill,  and  the  practice  under  it  as  would 
make  it  impracticable,  or  such  evasion  by  a  system  of  ‘‘washing” 
contracts  as  would  tend  to  drive  straightforward  men  out  of  the 
business. 

“FTRM  OFFERS” — WHEAT  EXPORTS. 

Take  our  great  agricultural  export  trade — that  upon  which,  to 
a  greater  extent  than  upon  any  other  branch  of  our  commerce, 
depends  the  prosperity  of  the  great  agricultural  classes  of  the  coun¬ 
try.  Take  the  item  of  wheat,  which  perhaps  is  more  characteristic 
than  any  other,  except  cotton.  American  wheat  and  other  prod¬ 
ucts  of  the  kind  are  marketed  in  Europe  and  throughout  the 
world  by  a  system  known  as  “  firm  offers.”  That  is  to  say,  in  the 
afternoon  of  each  day  on  the  Produce  Exchange  at  New  York,  or 
the  Board  of  Trade  at  Chicago,  the  American  broker  sends  cable 
advices  to  each  one  of  his  foreign  correspondents — sometimes  hun¬ 
dreds  in  number  andin  every  part  of  the  civilized  world,  especially 
throughout  Europe — naming  the  price  at  which  he  will  contract 
to  ship  them  wheat,  corn,  or  other  produce,  provided  the  accept¬ 
ance  reaches  him  before  the  noon  of  the  following  day.  The 
European  correspondent  neither  knows  nor  cares  about  the  con¬ 
ditions  which  will  probably  govern  the  course  of  prices  in  the 
next  twenty-four  hours.  But  he  does  know  the  conditions  which 
affect  the  immediate  demand  for  wheat  or  other  produce  in  his 
1455 


17 


country  or  vicinity,  or  is  in  telegraphic  communication  with  those 
who  do  know.  The  European  dealer,  therefore,  calculating  upon 
the  basis  of  the  offer  made  him,  sends  to  his  own  customers  through¬ 
out  the  province,  or  the  country  where  his  connections  are,  and 
offers  to  deliver  them  American  produce  at  certain  fixed  rates  in 
ease  their  answer  is  given  within  a  certain  number  of  hours. 

At  the  expiration  of  the  time  thus  given  each  European  corre¬ 
spondent  knows  whether  he  will  be  able  to  market  at  a  profit  the 
American  produce  that  has  been  offered  him  at  a  fixed  price;  and 
before  the  close  of  business  on  the  day  succeeding  that  upon  which 
the  American  broker  has  made  his  offer,  there  come  back  to  him  the 
acceptances  from  every  part  of  the  world  of  every  man  who,  at  the 
price  named,  cares  to  handle  American  produce.  These  acceptances 
are,  of  course,  from  but  a  comparatively  small  proportion  of  those 
to  whom  the  offers  were  made.  Advised  of  the  amount  he  will  be 
called  upon  to  deliver,  the  American  broker  goes  upon“  'change  ”  and 
purchases  to  cover  the  sales  thus  made,  and  having  made  his  offers 
according  to  the  best  information  in  a  matter  in  which  he  is  an 
expert,  the  average  result  is  a  net  profit  to  him  on  the  transaction. 
By  this  process,  without  the  employment  of  any  extraordinary 
amount  of  capital,  without  assuming  any  risk  except  the  one  which 
he  is  best  qualfied  to  measure,  and  in  return  for  the  assumption  of 
which  he  has  named  and  received  his  compensation,  the  American 
broker  has  succeeded  in  offering  at  every  spot  in  the  entire  world 
American  wheat  in  competition  with  that  from  every  other  country. 

If,  however,  he  is  not  to  be  permitted  thus  to  do  business ;  if  he 
is  not  to  be  permitted  to  sell  wheat  until  he  has  bought  it — for 
the  sale  is  closed  the  moment  the  return  telegram  is  received — this 
whole  system  of  offering  and  marketing  American  produce  must 
eease,  except  in  so  far  as  it  shall  be  carried  on  by  the  few  who  are 
able  and  willing  either  to  contract  in  advance  for  tenfold  the 
amount  of  produce  that  they  can  possibly  expect  to  market,  and 
thereby  tenfold  increase  their  expense  and  risk,  or  who  are  willing 
to  limit  their  offers  to  the  few  cases  which  would  be  possible  if  their 
aggregate  is  to  be  confined  to  the  amount  the  American  broker  has 
contracted  for.  The  result  would  be  practically  to  stop  the  offering 
of  the  American  produce  in  most  of  the  markets  in  the  world  in  any¬ 
thing  like  sharp  competition  with  that  from  other  countries,  or  so 
to  increase  the  amount  of  capital  required  and  the  amount  of  risk 
involved  as  to  require  the  exaction  of  a  much  larger  margin 
between  the  price  at  which  the  firm  offer  is  made  and  the  price  at 
which  the  produce  can  be  purchased  here.  And  as  the  former — the 
selling  price  abroad — is  fixed  by  the  level  of  the  world’s  commerce, 
this  would  mean  just  so  much  lower  prices  to  the  American  pro¬ 
ducer. 

Mr.  WILLIAMS  of  Mississippi.  This  bill  does  not  do  that. 

Mr.  WARNER.  It  is  suggested  by  my  friend  [Mr.  Williams  of 
Mississippi]  that  the  bill  does  not  do  that.  It  may  be  claimed 
that  if  the  precise  order  is  filled  by  the  shipment  of  standard  grade 
that  the  bill  does  not  prevent  that.  But  it  must  be  remembered 
that  every  single  one  of  these  orders  carried  on  in  trade  is  negoti¬ 
able  ;  and  when  a  Government  contractor  in  Bristol,  for  example, 
wants  to  be  sure  that  he  will  be  able  to  get  the  wheat  he  does  want 
at  a  price  which  will  enable  him  to  make  a  profit  out  of  his  con¬ 
tract,  he  buys  No.  2  red  wheat.  And  then,  even  though  he  does  not 
want  as  good  a  quality,  or  even  if  he  wants  a  better  quality,  he 
knows  that  when  the  time  comes  he  can  exchange  or  settle  that 
contract  in  such  a  way  as  to  secure  without  sacrifice  just  the 
quality  he  wants,  the  relation  of  the  prices  of  the  two  grades  being 
practically  constant  throughout  the  world.  The  case  is  the  same 
1455 - 2 


18 


as  with  cotton.  The  penalties  of  this  bill  would  prevent  perfectly 
legitimate  transactions. 

Now,  there  is  the  trouble  with  the  bill  of  my  friend  from  Mis¬ 
souri.  His  intentions  are  all  right;  but  he  does  not  know  what  he 
is  about.  He  assumes  that  he  knows  what  we  mean  when  we 
contract,  and  that  if  we  do  not  do  the  precise  thing  he  expects  us 
to  do  we  are  committing  a  crime  which,  under  appointment  from 
heaven,  it  is  his  business  to  look  out  for  and  punish;  whereas  this 
is  legitimate  business;  and  in  a  great  measure,  although  contracts 
for  future  delivery  of  cotton,  as  well  as  wheat,  are  in  what  is 
known  as  the  standard  brand,  this  is  the  way  by  which,  indirectly 
as  I  have  mentioned,  not  merely  the  standard,  brands  and  grades 
but  the  whole  great  product,  of  all  grades,' is  marketed  to  the 
purchaser. 

INDUCEMENT  FOE  TEMPORARY  INVESTMENT. 

I  have  attempted  to  illustrate  but  two  of  the  numerous  features 
of  deals  for  future  delivery,  the  conditions  of  which  are  inherent  in 
the  natural  process  of  the  marketing  and  use  of  our  chief  agricul¬ 
tural  staples.  There  is  another  consideration  which  most  substan¬ 
tially  affects  their  price,  and  by  which,  not  as  a  matter  of  original 
intent,  but  as  a  matter  of  beneficent  result,  the  producer  and  con¬ 
sumer  alike  are  greatly  aided.  Under  the  old  system  of  spot  deals 
in  the  products  now  iargely  handled  by  sales  for  future  deliv¬ 
ery,  the  investment  in  them — as  is  still  the  case  with  every  product 
not  dealt  in  by  futures — tended  to  be  limited  to  those  who  were 
specially  conversant  with  the  circumstances  of  their  production  and 
use,  and  had  an  extraordinary  amount  of  capital  at  their  disposal. 
As  fast,  however,  as  an  article  became  one  genrally  quoted  on  the 
exchanges  and  extensively  dealt  in  for  future  delivery  it  became 
an  attractive  object  for  temporary  investment,  which  is  what,  I 
presume,  is  meant  by  my  friend  from  Missouri  when  he  talks  about 
legitimate  speculation.  That  any  product  may  be  attractive  for 
temporary  investment — i.  e.,  for  the  use  of  the  vast  amount  of  float¬ 
ing  capital  that  is  waiting  permanent  investment,  or  kept  in  hand  by 
its  owner  as  a  safety  margin  in  case  his  more  risky  ventures  fail — 
certain  matters  are  essential.  The  product  must  be  a  well-known 
staple,  so  largely  produced  and  so  generally  dealt  in  as  to  be  famil¬ 
iar  to  the  general  public;  and  the  conditions  of  its  supply  and  use 
must  lie  such  as  to  make  it  reasonably  sure  that  it  has  an  actual 
worth4ndependent  of  all  probable  risks  which  can  be  realized  at 
any  time  without  extraordinary  trouble  or  sacrifice. 

These  conditions  are  most  nearly  met  in  the  case  of  our  great  agri¬ 
cultural  staple ;  and  to  the  precise  extent  that  facilities  for  infor¬ 
mation,  transportation,  and  trade  have  been  perfected,  our  food 
product  has  become  more  and  more  the  normal  investment  for 
enormous  amounts  of  capital  that,  until  lately,  were  left  idle  in 
banks  or  confined  to  investments  in  Government  funds.  An  im¬ 
portant  effect  of  this  development  has  been,  first,  greatly  to  increase 
the  number  of  investors  and  the  amount  of  capital  available  for 
investment  in  farm  produce,  and  thus  somewhat  to  increase,  and 
even  more,  to  steady  its  price;  and,  second,  to  reduce  the  margin  of 
expense  for  handling  farm  produce  between  the  producer  and  the 
consumer,  and  thus  benefit  both. 

As  to  the  former,  the  advantage  of  more  numerous  purchasers 
and  more  capital  for  investment  in  a  given  product,  I  shall  not 
assume  any  special  explanation  to  be  necessary. 

On  the  second  point,  however,  a  word  may  be  in  order.  So  long 
as  the  dealing  in  produce  is  confined  to  those  who  have  chosen  it  as 
their  main  business,  the  average  profit  which  they  expect  must  at 
least  be  as  high  as  the  ordinary  interest  upon  capital,  plus  the  re- 
1455 


19 


■ward  for  whatever  of  risk  is  involved.  Temporary  investments, 
however,  are  made  as  an  alternative  for  leaving  capital  idle ;  and 
therefore,  provided  the  investment  is  one  from  which  his  capital 
can  be  easily  and  promptly  withdrawn,  the  investor  is  willing  to 
purchase  the  wheat  or  cotton  involved  on  any  terms  which,  on  the 
average,  will  secure  him  a  small  fraction  of  the  ordinary  profits  in 
his  main  enterprises.  As  a  result  of  the  presence,  bidding  for  wheat 
to  be  delivered  far  in  the  future,  of  a  vast  amount  of  capital  which 
will  be  satisfied  on  the  average  with  profits  at  the  rate  of  2  or 
3  per  cent  interest,  the  discount  is  lessened,  that  is,  a  higher  price 
is  offered  to-day  for  the  wheat  which  will  be  needed  next  De¬ 
cember,  than  opuld  be  afforded  by  one  who  was  making  the  purchase 
and  sale  of  wii'eat  simply  his  main  business,  and  who  therefore 
would  insist  upon  discounting  the  expected  future  price  to  an  ex¬ 
tent  which  would  give  him  6  per  cent  or  more  interest  a  s  well  as  profits 
for  his  trouble.  As  a  natural  and  desirable  result,  .the  great  bulk 
of  the  ordinary  business  of  handling  and  marketing  the  farm  produce 
of  the  civilized  world  is  doue  through  the  temporary  investment 
of  floating  capital  willing  to  serve  its  purposes  at  an  interest  from 
3  per  cent  down  to  nothing,  and  eagerly  competing  for  the  chance 
to  do  so. 

The  difference,  after  deduction  of  all  strictly  transport  and  hand¬ 
ling  charges,  between  the  old  profit  margin — which  in  former  times 
used  alike  to  reduce  the  price  to  the  producer  and  increase  it  to  the 
consumer — and  that  which  obtains  to-day  is  a  practical  illustration 
of  the  nature  and  extent  of  the  universal  benefit  thus  secured. 

It  may  be  urged  that  the  great  amount  of  business  has  of  itself 
permitted  a  lower  relative  scale  of  charges  and  profit.  But  even 
this  is,  in  its  turn,  directly  attributable  to  the  eagerness  with  which 
capital  seeking  temporary  investment  avails  itself  of  the  opportu¬ 
nities  offered.  If  it  is  the  result  of  this  system — and  it  largely 
is  so — that  to-day  there  are  five  or  ten  purchases  and  sales  of  grain, 
including  the  great  number  made  by  those  who  have  taken  it  only 
as  a  temporary  investment,  as  compared  with  the  far  less  number  of 
those  made  in  the  main  by  special  dealers  a  few  years  since,  this 
simply  measures  the  competition  for  employment  of  capital  that  has 
been  the  result  of  present  methods,  and  indicates  the  inevitable  low¬ 
ering  of  interest  and  carrying  charges  that  is  the  result  of  this  com¬ 
petition.  In  short,  the  normal  transfers  and  deals  necessary  between 
the  farmer  and  the  baker  involve  at  the  present  day  not  more  than 
one-half  or  one-fourth  of  the  corresponding  expense  ten  years  ago — 
leaving  actual  transport  charges  entirely  out  of  the  question.  This 
is  the  result  of  the  fact  that  the  competition  of  capital  to  invest  in 
wheat  is  such  as  to  quadruple,  we  will  say,  the  amount  of  such  busi¬ 
ness  done,  and  therefore  reduce  the  cost  at  which  brokers  can  afford 
to  do  it. 

The  farmer  is,  therefore,  directly  benefited  in  the  resulting 
cheapness  with  which  his  necessary  business  is  transacted,  while 
the  extent  of  the  competition  for  investment  in  that  business 
measures  the  average  reduction  m  the  discount — greater  for  every 
month  in  the  future — that  will  be  made  in  naming  a  present  price  to 
the  farmer  from  the  probable  worth  of  the  wheat  at  the  time  when  it 
shall  be  finally  ground  into  flour. 

Noristhis  all.  Suchis  the  sanguine  temperament  of  humanity  that, 
in  the  case  of  any  article  thus  made  a  natural  subject  of  temporary 
investment,  the  tendency  always  is  to  offer  more  than  conservatism 
would  estimate  as  safe.  It  is  a  most  striking  and  conclusive  result 
of  this  that  the  New  York  market  averages  higher  than  the  Liver¬ 
pool  market,  and  the  Chicago  market  higher  than  the  New  York 
market,  when  cost  of  transport  is  considered — in  other  words,  that 
1456 


20 


the  temporary  investors  on  the  average  lose  their  interest  and  pay 
part  of  the  transportation  to  boot,  so  that  the  Western  farmer  or 
Southern  planter  gets  just  so  much  more  for  his  wheat  or  cotton. 

This  feature — an  advantage  alike  to  the  producer  and  consumer  of 
wheat  would  be  simply  obliterated  by  such  legislation  as  that  now 
proposed.  Not  only  does  the  fact  that  the  investments  are  tempo¬ 
rary,  and  that  the  same  wheat  is  sold  over  and  over  again  within  a  few 
months,  multiply  the  obstruction  and  expense  involved  by  the  pro¬ 
visions  of  this  bill;  but  it  is  a  fact  that  frequently — though  not 
nearly  so  often  as  claimed — it  is  convenient  for  all  parties  con¬ 
cerned  to  settle  by  paying  differences.  I  presume  my  friend  from 
Missouri  will  agree  that  if  a  bona  fide  temporary  investor  occa¬ 
sionally  wanes  to  back  out  of  his  contract  he  should  be  permitted 
to  do  so  if  he  can  arrange  with  the  one  to  whom  he  is  under 
obligation.  But  the  trouble  is  that  if  he  wishes  to  do  so  once  in  ten 
times  the  penalty  provided  by  this  bill  will  destroy  his  chances  of 
profit  on  the  whole  ten  deals,  and  the  result  will  be  that  no  one 
will  have  to  do  with  business  subjected  to  such  intermeddling,  except 
the  few  genuine  gamblers,  who  will  arrange  to  evade  the  law,  as 
they  can  easily  do  if  they  are  unscrupulous  enough. 

Mr.  COX.  You  have  demonstrated  in  your  proposition  that  in 
order  to  send  the  wheat  and  the  cotton  to  the  consuming  market, 
you  bring  into  use  the  floating  capital,  and  that  makes  it  much 
more  beneficial  to  the  consumer. 

Mr.  WARNER.  It  makes  the  interest  charge  less. 

Mr.  pOX.  If  that  is  true,  what  is  the  man  to  do  that  has  to  buy 
the  actual  cotton? 

Mr.  WARNER.  I  must  confess  that  my  friend  has  touched  a  per¬ 
fectly  pertinent  point.  The  man  who  actually  proposes  to  specu¬ 
late  in  spot  cotton  has  to  make  his  money  out  of  the  lower  price  he 
can  compel  the  producer  to  accept  and  the  higher  price  he  can 
compel  the  consumer  to  give ;  and  he  is  the  man  who  would  be  hurt 
by  this  bill. 

Mr.  COX.  Then  the  man  who  buys  the  cotton  and  pays  the 
money  for  it  and  gets  the  cotton  is  the  fool  in  the  transaction? 

Mr.  WARNER.  It  is  actually  the  fact  that  most  money  made  in  the 
business  of  marketing  cotton  consists  in  the  commissions  which  are 
received  from  sanguine  gentlemen,  who  at  the  end  find  they  have 
invested  their  money  and.  transported  the  cotton  without  receiving 
much,  if  any,  interest. 

Mr.  COX.  So  that  the  whole  question  depends  on  the  imagination 
of  the  gentleman  engaged  in  it? 

Mr.  WARNER.  Not  at  all.  It  is  the  way  in  which  our  crops  are 
marketed.  It  is  not  profitable  to-day,  as  it  used  to  be  in  former 
years,  for  a  man  to  go  out  and  try  to  corner  and  control  the  crops 
of  a  single  neighborhood,  or  to  try  to  control  the  supply  of  a  certain 
number  of  factories.  If  he  tries  to  pinch  the  producer  and  the 
consumer  in  that  way,  the  system  of  deals  for  future  delivery 
will  pinch  him  between  them,  and  give  the  producer  a  better  price, 
at  the  same  time  that  the  consumer  gets  his  supplies  more  cheaply. 

Mr.  WALKER.  I  think  some  gentlemen  have  failed  to  quite  see 
that  this  transportation  is  done  practically  for  nothing,  that  the 
crops  of  this  country  are  handled  practically  for  nothing. 

Mr.  WARNER.  I  should  not  put  it  quite  as  strongly  as  that.  I 
think  they  are  handled  practically  for  nothing  so  far  as  the  interest 
charge  is  concerned,  and  very  frequently  the  competition  of  capital 
does  pay  a  part  of  the  transportation. 

Mr.  WALKER.  It  brings  the  consumer  and  the  producer  right 
together. 

Mr;  WARNER.  Right  together,  at  the  expense  of  these  middle¬ 
men  about  whom  I  have  been  talking. 

1455 


21 


Mr.  TALBERT,  of  South  Carolina.  How  do  those  men  make  their 
money,  then? 

Mr.  WARNER.  The  records  will  show  that  of  the  thousands  who 
do  this  great  business  and  invest  their  money  to  move  your  crops 
from  the  different  parts  of  this  country  to  Europe  nine-tenths  of 
them  lose  money. 

Mr.  TALBERT,  of  South  Carolina.  They  get  rich  all  the  same. 

Mr.  WARNER.  I  beg  your  pardon,  they  do  not  get  rich.  The 
brokers  do  well,  who  also  at  the  same  time  are  profited  by  the 
sanguine  temperament  of  these  gentlemen  ;  but  the  man  who,  with 
the  great  competition  of  capital,  actually  goes  to  the  Southern 
planters  and  buys  their  cotton  and  takes  that  cotton  himself  and 
tries  to  market  it  in  Liverpool,  paying  all  freight  and  charges,  is 
the  fool  from  whom  his  money  will  be  soon  parted ;  and  I  do  not 
know  of  a  man  who  has  been  crazy  enough  to  do  it  lately. 

Mr.  COX.  Is  there  not  some  way  to  protect  him? 

Mr.  WARNER.  This  bill  would  do  it.  This  bill  would  put  the 
farmers  at  the  mercy  of  the  local  factors,  and  it  would  put  the 
factories  under  the  thumb  of  men  who  will  corner  the  spot  cotton. 

EXEMPTIONS  PROPOSED. 

I  am  aware  that  by  a  somewhat  elaborate  system  of  exemptions,  my 
friend  from  Missouri  believes  himself  to  have  left  the  capitalist 
opportunities  for  investment  in  every  direction  where  it  will  help 
the  farmer  at  the  same  time  that  he  has  cut  him  off  from  realization 
in  every  direction  which  is  an  inducement  to  capital.  This  is  a 
marvelously  astute  plan — provided  the  capitalist  is  an  ass  and  will 
walk  into  a  hole  for  the  farmer’s  benefit,  knowing  that  he  can  never 

get  out  of  it  for  his  own.  Until,  however,  there  shall  arise  a  new 
ind  of  fool — one  who  keeps  his  money  until  he  lets  the  farmer  fleece 
him — all  such  exceptions  are  simply  ridiculous,  and  no  capitalist 
will  be  attracted  by  le^al  permission  to  go  into  a  speculation,  by 
which  somebody  else  will  be  assisted,  at  the  same  time  that  he  i« 
forbidden  to  get  out  of  it  in  the  way  most  likely  to  be  of  advantage 
to  himself.  If  he  can  not  sell  or  settle  his  futures  as  he  pleases, 
he  knows  better  than  to  buy  them  from  the  farmer  or  anyone  else. 

THE  TEST  OP  EXPERIENCE. 

No  test  of  the  pudding,  however,  is  so  conclusive  as  the  taste,  and 
nothing  can  be  more  conclusive  than  the  tabulated  experience  of 
our  principal  markets  under  the  development  of  the  system  of  deal¬ 
ing  in  futures ;  and  with  one  suggestion  I  shall  quote  the  statistics 
I  have  lately  had  prepared.  That  suggestion  is  this:  While  the 
result  is  uniformly  to  demonstrate  that  so  far  from  excessive  deal¬ 
ings  for  future  delivery  being  a  detriment  to  the  price  of  the  prod¬ 
ucts  dealt  in,  the  contrary  is  the  result,  and  prices  are  actually 
found  to  be  higher  in  proportion  to  the  extent  of  such  dealings  in 
futures,  I  must  not  for  a  moment  be  understood  to  attribute  to  the 
extent  to  which  futures  are  dealt  in  the  whole  of  the  more  favor¬ 
able  market  which  coincided  with  the  increase  of  such  deals  in 
futures.  For,  although  the  tendency  of  so  systematizing  a  business 
as  to  make  it  attractive  to  a  vast  amount  of  capital  that  otherwise 
would  be  unavailable  for  its  purposes  is  inevitably  to  cheapen  the 
processes  of  such  business  and  give  better  prices  to  the  producer, 
yet  in  the  long  run  the  relations  of  supply  and  demand  are  the  great 
determinant  factors  in  the  price  of  farm  products,  as  in  the  case  of 
everything  else. 

To  a  considerable  extent,  however,  on  account  of  the  sanguine 
temperament  that  characterizes  human  nature,  the  extent  of  deals 
for  future  delivery  is  in  a  measure  a  consequence  of  high  prices  and 
1455 


22 


at  the  same  time  a  stimulus  to  higher  ones.  No  one  appreciates 
more  clearly  than  I  do  that,  since  every  investment  in  wheat  has  its 
corresponding  sale  and  every  sale  its  corresponding  investment,  the 
effect,  so  far  as  concerns  the  mere  balance  of  sales  and  investments, 
is  rather  to  steady  the  price  than  to  improve  it,  such  enhancement 
as  comes  from  these  deals  being  due  to  the  competition-  of  cajjital 
thus  induced  and  the  cheapening  of  interest  and  other  carrying 
charges  thereby  resulting. 

The  first  table  which  I  quote  shows  the  total  sales  on  the  New 
York  Produce  Exchange  of  wheat  for  future  and  spot  delivery,  with 
the  range  and  average  price  of  the  contract  grades  for  each  month, 
monthly,  for  the  past  six  years. 

Total  sales  on  the  New  York  Produce  Exchange  of  wheat  for  future  and  spot  delivery , 
with  the  range  and  average  price  of  the  contract  grades  for  each  months  monthly , 
for  the  past  six  years . 


Total  sales  of 
wheat  futures 

No.  2  red  winter  wheat. 
Price  per  bushel. 

Mouths* 

and  spot 
bushels. 

Range  for 
month. 

Average  for 
month. 

1888. 

January  . 

66, 561, 000 

Cents. 

89*  to  93 § 

Cents. 

91xg 

February . 

76, 167,  000 

88  91* 

8922 

March . 

96,  038,  000 

88*  93* 

90* 

April . ‘ . . 

123,  221,  000 

88|  97* 

93fs 

May . 

171,  833,  200 

91  103 

96| 

June . 

89,  043,  000 

86  95 

eoj 

July . 

125,  226,  000 

87*  98* 

90** 

August . . 

263,  522,  000 

91|  103* 

97/s 

September . 

157,  868, 100 

97  103* 

99  ft 

October . 

224,  505,  200 

104  121 

mil 

November . 

114,  954,  000 

100|  116 

108| 

December . 

49, 203,  000 

99*  108* 

104* 

Total  range  and  average . 

1, 558, 141,  500 

86  121 

97* 

1889. 

January . 

78,  070,  600 

931  to  104f 

98T\. 

February  . 

March . 

April  . . 

May . 

June . 

60,  346,  000 
176,  626,  300 
152,  587,  900 
53,  700, 150 
146,  761,150 

93*  ioi| 
88*  99§ 
82*  89*| 
80  86* 
79|  882 

97* 

93* 

86* 

83t3b 

83** 

July . 

83,  508,  000 

85*  91| 

88* 

August . 

34,  821, 500 

84  91* 

88* 

September . 

65, 160,  000 

83*  88* 

85* 

October . 

146,  565,  000 

81*  88 

84* 

November . 

66,  435,  000 

82*  86f 

84/b 

December . 

58,  567,  000 

83*  87f 

85* 

Totals,  range  and  average . 

1, 123, 148,  600 

79|  1042 

88* 

1890. 

January . 

52,  531,  000 

84T9S  to  872 

86* 

February . 

80,  024,  000 

8322  87* 

85* 

March . 

116, 938,  000 

86*  89* 

87* 

April . 

245, 139,  000 

862*  982 
93|  103* 

93* 

May . 

138, 475,  000 

98* 

J  une . . . 

66,  547,  000 

91*  962 

94* 

July . 

95,  218,  000 

94  1002 

96i3b 

August . 

137,  625,  000 

94*  1112 

104 

September . 

94,  914,  000 

99*  106* 

101*5 

October . 

76, 435,  000 

100*  1092 

106* 

November . 

90, 138,  000 
44, 343, 000 

96*  1082 

102* 

December . . 

lDlf  106* 

104  ig 

Totals,  range  and  average. . . . 

1,  238,  327,  000 

83*|  111* 

96* 

1455 


23 

Total  sales  on  the  New  York  Produce  Exchange  of  wheat,  etc.— Con  tinned. 


Months. 


1891. 

January . 

February  . 

March  . 

April . . . 

May . 

June . . . 

July . 

August . 

September . 

October  . 

November . 

December . 

Totals,  range,  and  average. . 

1892. 

January . 

February . 

March . 

April . 

May . 

June . . 

July . 

August . 

September . 

October . 

November . 

December . 

Totals,  range  and  average.. 

1893. 

January . 

February . . 

March . . 

April . . 

May . 

June . . 

July . 

August . . 

September . 

October . 

November . 

December . 

Total  range  and  average 


Total  sales  of 
wheat  futures 

No  2  red  winter  wheat. 
Price  per  bushel. 

and  spot 
bushels. 

Range  for 
month. 

Average  for 
month. 

53,  823,  000 

Gents. 

103*  to  110* 

Gents. 

105! 

71,  062,  000 

109* 

112* 

110i* 

190, 305,  000 

109 

118* 

113* 

287,  597,  000 

114£ 

128* 

119/, 

218, 910,  000 

109* 

117| 

113* 

121,  202.  000 

102g 

Ill 

107** 

124,  616,  000 

93* 

106| 

99* 

169.  732,  000 

97f 

114 

105* 

118, 814.  000 

100 

107* 

103/, 

146,  076,  000 

102 

107 

104! 

117, 424,  000 

103* 

108 

105*1 

72,  711,  000 

103 

107f 

105/, 

1,  692,  272,  000 

93* 

128* 

108 

93,997,  000 

99|  to 

105| 

102* 

154,  577,  000 

99* 

109| 

104| 

142,  280,  000 

96 

107 

101 

190,  717,  000 

96J 

102* 

98* 

134,  954,  000 

94 

99 

96* 

85.  643,  000 

87* 

100 

9111 

66,  637,  000 

82* 

88* 

86t\ 

63,  620,  000 

79* 

85 

82* 

39,  604,  000 

77* 

80! 

78J 

72,  646,  000 

73* 

80! 

77  !* 

63,  661,  000 

73* 

77* 

75* 

43, 112,  000 

74 

79 

76* 

1, 151,  448,  000 

73* 

109* 

89| 

60,  765,  000 

77J  to  824 

79* 

49,  551,  000 

76J 

81| 

79/, 

99. 139,  000 

73f 

79§ 

75* 

185,  882,  000 

74 

78! 

76* 

123,  408,  000 

74* 

81! 

77* 

145,  676,  000 

68* 

76* 

72* 

101,  844,  000 

64* 

73* 

71* 

65,  705,  000 

65§ 

79! 

68 

38,  814,000 

68* 

74* 

72* 

77,  013,  000 

65J 

72 

69* 

74,  234,  000 

64| 

68* 

66* 

30,  434,  000 

64| 

69 

67* 

1, 052,465,  000 

64* 

82 

72* 

The  most  summary  consideration  of  this  table  makes  it  evident 
that  prices  and  future  dealings  are  directly  proportioned  to  each 
other,  i.  e.,  the  more  extensive  the  dealings  in  futures,  the  higher 
the  price,  and  vice  versa.  Taking  the  summary  for  the  several 
years,  we  have  during  1888  sales  of  1,560,000,000  bushels,  including 
spot,  at  an  average  of  97-*  cents  per  bushel;  in  1889,  1,123,000,000 
bushels  of  sales,  at  an  average  of  88£  cents;  in  1890,  an  aggregate  of 
1,240,000,000  bushels,  at  an  average  of  96f  cents;  in  1891,  an  aggre¬ 
gate  of  1,700,000,000  of  sales,  at  an  average  of  $1.08;  in  1892,  an 
aggregate  of  1,150,000,000  of  sales,  at  an  average  price  of  89$  cents ; 
and  in  1893  an  aggregate  of  but  1,050,000,000  of  sales,  at  an  average 
of  only  72$  cents.  In  other  words,  the  greater  the  extent  of  the 
so-called  speculation  in  wheat,  the  higher  its  price,  and  vice  versa. 

II. 


There  is  another  way  of  looking  at  the  same  question,  and  with¬ 
out  special  introduction  I  present  the  following  table : 

1455 


Prices  at  New  Tori  and  Liverpool  for  spot  No.  t  red  wheat.  Ocean  steam  freights  from  New  York  to  Liverpool.  Total  sales  of  wheat,  spot  and 
futures,  at  New  York  City.  Total  wheat  crop  of  the  United  States.  Patio  of  aggregate  sales  to  crop. 


24 


Ratio  of  sales 
at  New  York 

of  futures 

and  spot 

wheat  to  the 

wheat  crop 

of  the 

United  States 

1  for  the  same 

crop  year 

(times 

greater). 

*»  o  O 

Wheat  crop 
of  the 

United  States 
for  the  cor¬ 
responding 
year,  as  esti¬ 
mated  by 
the  U.  S.  de¬ 
partment  of 
Agriculture. 

Bushels. 

421,  086,  000 

512,  765,  000 

357, 112,  000 

457,  218,  000 

456,  329,  000 

415,  868, 000 

490,  560,  000 

399,  262,  000 

a611,  780,  000 

a515,  949,  000 

6396, 131,  725 

Total  sales  of 
wheat  at  New 
York,  spot 
and  future,  for 
the  crop  year. 

Bushels. 

1, 322,  888,  000 
1,  279,  907,  000 

1,  376.  397,  000 

1, 794,  961,  000 

1,445,411,000 

1,603,369,090 

1, 154,710,000 

1,  481,  575,  000 

1,  551,541,000 

1,013,701,  000 

797, 150, 000 

Ocean  freights  on  wheat,  per 
bushel,  by  steam,  New  York 
to  Liverpool. 

Extreme 
range  of 
monthly 
averages. 

CO  CO  CO  CO  rH  rH 

Lowest 

monthly 

average. 

r-t  <M  c5i-t  ONrlOrlHN 

■a 

Highest 

monthly 

average. 

•^Hw-^-tfcoiOiacoiococo 

"O 

Prices  at  Liverpool  for 
No.  2  red  wheat,  per 
bushel. 

Highest  and  lowest 
prices  quoted  for  spot 
delivery. 

Ex¬ 

treme 

range 

for 

season. 

3eo°o°c?co0p!rt20o0c50^#  m 

NNnHnWONCOrHH 

O 

Low¬ 

est. 

OCC*f  COiOHinkOOCCOO 
000}0000>G>00}t>0 

rH  rH 

4* 

‘ffrS 

H  ® 

in^iOrH05COCOCOCOOCO 
COHOHOJHOWN  JIOCi 

<*•' 1  ■ 1  ■ 1  ' 1 ' 1 ' 1 ' ' 

Prices  at  New  York  of  No.  2 
red  wheat  (the  standard 
grade)  for  spot  delivery. 

Highest  and  lowest 
price  actually  sold 
for,  with  extreme 
range. 

Ex¬ 

treme 

range 

for 

season. 

OJCO<M<MC4'*<N<M<NC4rH 

© 

Lowest 

spot. 

price. 

«p  to 

©t-MOOt-t-OOfflOKOiO 

© 

48- 

High¬ 
est  spot 
price. 

CO  rH  ^cTJoSMf 
NOOOONOCOHOOf 

«*• 

Annual 

average 

price 

(crop 

year) 

per 

bushel. 

©  oo  o  ocf  <x>  ©  oo  co  co  go 

HO)C>OCOOCCOOt>0 

«► 

Crop  year, 
July  1  to 
June  30. 

^lOCOt'OOOiOHNWH 

ooaopooooooo©©©©© 

co^icciticoalorHcico 

OOOOCOOOOOCOOOOJC5C505 

CO  CO  CO  OO  OO  00  OO  00  OO  00  oo 

g<o 

Pol 


iff 

CO  _ 

is 


Is 


*  § 

®  a 

§3 

•O  Pi 
fl  Q. 


^  * 

3 

g  a 

if 

«1 

®  ■ 


*■3 
fa 
i  >> 


3  o 

© 'd 

13 

II 

•Ss 

s 

I  p, 

’&  ° 

GO  © 

8S 

'§<g 

a  ° 

« 

^S  . 
®  s  « 

a  Sa* 

Ov3-£ 

*C  «  g 
©  ©  2 

a 

®5  o 
S'aH 

£jfi1 S 

O  o  2 
Q  Sfc 


1455 


25 


Unless  I  am  mistaken  as  to  the  glear  and  conclusive  character  of 
this  table,  it  needs  but  little  explanation.  The  volume  of  trading 
in  futures  and  cash  wheat  at  New  York  has  declined  in  the  decade 
from  three  and  one-seventh  times  the  crop  in  1883-84  to  two  times, 
or  actually  less,  in  1892-^93  and  1893-'94 ;  that  is,  prices  and  vol¬ 
ume  of  deals  have  decreased  together. 

Again  the  Liverpool  market  is  usually  lower  than  the  New  York 
market,  freights  and  necessary  charges  being  considered,  and  New 
York  is  likewise  usually  lower  than  the  Chicago  market,  which  is 
generally  considered  the  home  of  speculative  trading.  Or  to  sum 
up  the  consequences  of  the  excessive  speculations  in  wheat,  the  cost 
of  transporting  wheat  from  Chicago  to  New  York  and  from  New  York 
to  Liverpool,  and  of  the  interests  and  charges  involved  in  carrying  it 
from  the  time  it  is  received  at  Chicago  until  it  is  actually  consumed, 
on  an  average  of  six  months  later,  is  so  reduced  by  the  competition 
of  capital  utilizing  wheat  futures  as  a  temporary  investment  that 
the  business  is  practically  done  for  nothing,  and  the  cost  of  all 
processes  between  the  time  when  wheat  reaches  Chicago  and  the 
time  when  it  is  sold  to  an  English  miller  is  practically  reduced  to 
the  cost  of  transportation  alone,  and  the  producer  and  consumer 
are  alike  benefited  by  being  thus  brought  more  nearly  together  and 
relieved  from  what  otherwise  must  be  the  far  greater  charge  of 
serving  them  both. 

III. 

In  order  to  put  upon  record  as  well  a  clear  exhibit  of  the  business 
transacted,  as  to  avoid  the  merging  and  thus  losing  even  immate¬ 
rial  details  in  the  figures  of  a  general  average,  I  shall  add  as  an  ap¬ 
pendix  to  my  remarks  a  table  prepared  by  Mr.  J.  C.  Brown,  statistic 
cian  of  the  New  York  Produce  Exchange,  to  whom  I  am  glad  to  ac¬ 
knowledge  other  indebtedness,  showing  the  approximate  sales  on  the 
New  York  Produce  Exchange  of  contract  wheat  for  future  delivery 
for  each  month,  and  separately  in  each  month  for  every  other  month, 
together  with  the  monthly  range  and  monthly  average  price  of  spot 
No.  2  red  winter  wheat,  monthly  during  the  same  period  from  Jan¬ 
uary  1,  1890,  to  June  1,  1894. 

I  am  far  from  claiming  that  every  figure  in  the  appendix  noted  is 
significant  upon  the  questions  involved  in  this  bill.  Indeed,  the 
one  direction  in  which  they  are  conclusive  is  as  demonstration  of 
the  immateriality  of  such  considerations  when  compared  with  the 
dominant  one  of  the  relation  of  general  supply  and  demand,  and  the 
most  important  variance — that  of  temporary  conditions  of  transpor¬ 
tation. 

To  an  extent,  however,  which  I  myself  did  not  anticipate,  I  find 
that  the  apparent  connection  between  the  volume  of  sales  and  the 
price  of  wheat  is  not  merely  in  the  direction  I  have  indicated — that 
is,  toward  the  coincidence  of  extensive  sales  and  high  prices ;  but 
that  this  tendency  is  even  more  marked  than  I  had  supposed,  and 
in  this  connection  I  submit  the  following  diagram,  showing  in 
graphic  proportion  the  comparative  course  of  average  prices  and 
volume  of  business,  including  sales  for  future  delivery  (which 
indeed  constitute  its  far  larger  portion)  in  wheat  upon  the  New 
York  Produce  Exchange  for  the  last  six  years.  It  needs  no  explana¬ 
tion.  It  appears  there  so  plainly  that  he  who  runs  may  read — unless 
he  runs  away  from  it — that,  generally  speaking,  in  proportion  to  the 
activity  in  dealings  in  wheat  as  measured  by  the  extent  of  the  very 
business  this  bill  is  intended  to  hamper,  is  the  price  which  makes 
its  production  a  profitable  one  to  our  farmers  of  the  Northwest. 

1456 


CHART  SHOWING  MONTHLY  VOLUME  OF  TRADE  IN  WHEAT  AND  AVERAGE  PRICE  OF  NO.  t  RED  WHEAT  ON  THE 


26 


1455 


27 


IV. 

So  much  for  the  general  argument  upon  this  point.  It  may  he 
suggested,  however,  that  it  would  he  more  conclusive  should  I  take 
the  conditions  which,  because  they  now  prevail,  are  those  at  once 
most  serious  and  most  practical.  If  the  hill  introduced  by  my 
friend  from  Missouri  is  thus  to  be  judged,  damnation  awaits  it. 
The  price  of  wheat  for  May  of  this  year,  the  great  delivery  month 
in  the  Eastern  markets,  has  ranged  from  56  cents  to  61|,  averaging 
68f  cents  per  bushel.  The  sales  for  delivery  during  the  month  of 
May,  1894,  on  the  New  York  market  were  as  follows: 


Contracts  made  in — 

Bushels. 

Average 

price. 

July  1893  . 

180, 000 
910. 000 
2,  685,  000 
31, 445,  000 
37,  090,  000 
19,  765,  000 
29,  690,  000 
83,  820,  000 
68, 185,  000 
51,  555,  000 

Cents. 

83£ 

83J 

83i 

m 

73£ 

72f 

70£ 

651 

63 

631 

A n  grist,  1 893  . _ _ .......... 

Se.pt.Pimlmr,  1 893 _ _ _ _ _ _ ..... 

On.tohftr,  1 893  _ _ _ _ _ _ _ _ 

"November,  1893  _ _ _ _ 

pwimrihftrj  18DS  _ _ ... 

•Tamiary  1894.  _ _ _ _ _ _ 

"February  1894.  _ _  _ __ _ 

"M  areb ,  1 894 . . . . . 

April,  1894  ............................ . . . . 

Total _ 

325,  325,  000 

68 

From  this  it  is  plain  that,  so  far  from  the  bears  last  summer, 
autumn,  and  winter  having  beaten  down  the  price  of  wheat  by  sales 
for  future  delivery,  it  was  the  bulls  instead  who,  on  their  faith  in 
wheat  prices,  invested  in  wheat  futures  an  amount  sufficient  to  carry 
our  total  stock  of  wheat  on  hand,  at  prices  averaging  about  9  cents 
above  what  it  was  worth  during  the  month  of  May,  and  who  have 
found  themselves  the  losers  to  the  extent  of  many  millions  of  dollars 
on  account  of  the  fact  that  they  had  to  pay  during  May,  1891,  a  far 
higher  price  for  the  wheat  which  they  had  bought  months  in  advance 
than,  when  the  price  came  to  be  settled  by  supply  and  demand  in 
that  month,  the  actual  wheat  was  worth. 

In  other  words,  the  farmer  who  took  advantage  of  the  market 
afforded  last  September  by  the  system  of  sales  for  future  delivery 
obtained  24  cents  per  bushel  more  for  the  wheat  that  would  have 
been  called  for  by  actual  demand  iu  May  than  he  who  held  it  until 
May  received  for  similar  wheat,  when  the  price  was  fixed  by  actual 
supply  and  demand.  If  he  sold  in  October  he  received,  under  the 
same  system,  19  cents  more  than  though  he  had  waited  until  May. 

If  he  sold  in  November  his  advantage  was  15  cents;  in  December, 
13cent8;  in  January,  11  cents;  in  February,  6£  cents;  and  even 
after  holding  it  until  March  or  April,  if  he  then  took  advantage  of 
this  system,  he  would  have  received  3£  cents  per  bushel  more  than 
the  average  price  in  Mayas  settled  by  supply  and  demand. 

Mr.  TERRY.  That  was  before  we  repealed  the  purchasing  clause  • 
of  the  Sherman  law. 

Mr.  WARNER.  Wheat  which  was  sold  for  future  delivery  near 
to  the  time  of  the  repeal  brought  the  highest  price,  much  higher 
than  when  it  was  afterwards  fixed  by  the  law  of  supply  and  demand. 

Mr.  SIBLEY.  What  about  those  who  got  only  35  cents  a  bushel 
for  their  wheat? 

Mr.  WARNER.  Where  were  they? 

Mr.  SIBLEY.  They  were  in  Tennessee,  the  constituents  of  the 
gentleman  from  Tennessee  [Mr.  Cox]. 

Mr.  WARNER.  They  must  have  been  waiting  for  this  bill  to  pass. 

1455 


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Mr.  SIBLEY.  They  have  been  waiting  for  something  a  long  time. 

Mr.  WARNER.  They  ought  to  have  sold  their  wheat  last  fall, 
for  future  delivery,  when  they  would  have  gotten  good  prices. 

And  these  figures  develop  another  consideration,  namely,  that, 
instead  of  the  dealings  in  futures  fixing  tLie  price  of  spot  wheat,  it  is, 
on  the  contrary,  the  growing  certainty  of  the  relation  of  supply  and 
demand  for  any  given  date  that,  as  that  date  draws  nearer,  deter¬ 
mines  the  price  at  which  futures  then  deliverable  can  be  sold.  The 
demonstration  of  our  late  experience  is  therefore  absolute,  first,  that 
by  the  system  of  sales  for  future  delivery  the  farmer  has  not  been  in¬ 
jured,  but  has  been  greatly  advantaged  as  compared  with  what  would 
have  been  his  fate  had  he  depended  upon  spot  sales;  and,  second, 
that  the  price  of  spot  wheat  is  really  fixed  by  supply  and  demand, 
which,  in  its  turn,  as  fast  as  its  proportions  develop,  controls,  and 
is  not  controlled  by,  the  market  for  future  delivery. 

THE  REAL  CAUSE  OF  LATE  LOW  WHEAT  PRICES. 

But  my  friend  from  Missouri  may  remind  me  that  the  price  of 
wheat  is  a  serious  and  material  matter,  and  may  ask  me  to  account 
for  its  serious  decline  during  the  past  few  years.  I  might  retort  by 
quoting  from  his  own  speeches  and  pointing  to  the  price  of  silver 
and  talking  about  Indian  rupees  and  Indian  exports.  But  I  think 
he  knows  better  than  that  now,  as  I  certainly  do.  And  knowing 
that  it  is  supply  and  demand,  and  not  rupee  exchange  or  Hindoo 
proclivities,  that  govern  the  price  of  wheat — knowing,  as  I  suspect 
he  does,  that  so  far  from  the  decline  in  silver  prices  of  late  years 
having  stimulated  Indian  exports  of  wheat,  those  exports  have,  on 
the  average,  been  getting  less  and  less  instead  of  greater  and  greater, 
I  simply  quote  here  the  statistics  as  to  exports  of  wheat  from  British 
India,  which  show  that  the  only  year  of  late  in  which  wheat  exports 
have  been  as  large  as  they  were  ten  years  ag6  was  the  year  1891-,92, 
when  wheat  was  higher  here  than  in  any  other  year  of  late,  and  that 
exports  of  wheat  from  India  have  on  the  whole  decreased  since  1881. 


Exports  0/  wheat  from  British  India,  from  official  sources ,  expressed  in  bushels  or 
60  pounds, for  the  years  ( crop  years)  April  1  to  March  31. 


April  1  to  March  31. 

Wheat  ex¬ 
ported. 

April  1  to  March  31. 

Wheat  ex¬ 
ported. 

1867  1868  . 

Bushels. 
558,  852 
514, 231 
145, 988 
463,  908 

1, 189.  251 
735,  485 

3,  277,  781 

2,  004,  156 

4,  686.  767 

10,  428,  327 

11,  896,  580 

1,  972,  544 

4, 109, 495 

13,  896, 167 

1881-1882  . 

Bushels . 

37, 148,  543 
26,  495,  024 
39,  202,  638 
29,  588,  311 
39,  312,  969 
41.  588,  235 
25,  271,  249 
32,  872, 151 

25,  758,  551 

26,  754, 103 
56.  573,  043 

27,  950,  445 
22, 520,  000 

1868-1869  . 

1882-1883  . 

1869-1870  . 

1883-1884  . 

1870  1871  . 

1884-1885  . 

1871-1872  . 

1885-1886  . 

1872-1873  . 

1886-1887  . 

1873-1874  . 

1887-1888  . 

1874-1875  . 

1888-1889  . 

1875-1876  . 

1889-1890  . 

1876-1877  . 

1890-1891  . 

1877  1878  . 

1891-1892  . 

1878-1879  . 

1892-1893  . 

1879  1880  . 

1893-1894  . 

1880-1881  . 

I  have  done  what  I  am  afraid  my  friend  from  Missouri  has  not 
done,  looked  about  the  world  to  see  what  was  the  explanation  of 
the  fall  in  price  of  American  wheat.  There  are  a  number  of  causes, 
sir,  but  they  may  all  be  characterized  by  the  one  which  I  shall  call 
to  your  special  attention. 

ARGENTINE  WHEAT  DEVELOPMENTS. 

The  Argentine  Republic  has  of  late  been  developed  for  agricul¬ 
tural  purposes,  especially  wheat  production,  with  a  rapidity  which 
is  comparable  only  to  the  promptness  with  which,  when  her  broad 
1455 


29 


lands  were  once  opened  to  communication,  Dakota  became  so 
important  a  factor  in  our  own  wheat  supply.  I  append  the  statis¬ 
tics  for  the  last  twenty  years,  from  which  it  appears  that  wheat 
exports  from  the  Argentine  Republic,  starting  at  nothing  in  1870 
and  not  becoming  constant  in  any  degree  until  1883,  had  risen  to 
18,000,000  bushels  in  1892  and  39,000,000  bushels  in  1893. 

Exports  of  wheat,  of  flour,  with  total  as  wheat ,  from  the  Argentine  Republic  an¬ 
nually,  from  official  sources . 


Tear. 

Wheat 
(bushels  ot 
60  pounds). 

Flour 
(barrels  of 
196  pounds). 

Total  as  wheat 
bushels  (reck¬ 
oning  flour  at  4J 
bushels  to  a 
barrel) . 

1870  . 

1871 . 

294 

180 

1, 104 
11, 002 
6,  351 

1872  . 

625 

2,  306 

1873 . ; . 

182 

1,  371 
270 

1874 . 

13, 136 

14,  351 
607 

1875 . 

135 

1876  . 

766 

3,975 
2,  453 
32, 822 

18,  653 
18,  372 
241,  300 

1,  024,  311 
114,  870 

70,  936 
90,  436 

2,  477,  529 
4, 175,  641 

3,  261,  047 
1,  657,  615 
9,  013,  366 
6,  897,  990 
1,  008,  095 

1877  . 

7,  334 

1878 . 

93.  601 

1879  . 

943, 176 

18, 030 
16, 009 
14,  481 
6, 173 

1880 . 

42,  829 

1881 . 

5,  772 

1882  . 

62, 658 
2, 232,  329 
3,  986,  623 
2,  884, 109 
1,  391,265 
8,  739, 987 
6,  574,  431 

1883 . . . 

54,  489 

1884 . 

42,  004 
83,  764 
59, 189 
60,  751 

1885  . 

1886 . 

1887 . 

1888 . 

71,  902 

1889  . 

837,  982 
12,  047,  924 
14,  534,  016 
17,  273,  394 
37,  037,  280 

37,  803 

1890 . 

135, 177 

12,  656,  221 
14,  889,  106 
18,  227,  457 
38,  960,  679 

1891 . 

78, 909 

1892  . 

212,  014 
427,  422 

1893*  . 

♦Commercial  reprint  of  Argentine  official  figures. 

While  the  monthly  bulletin  for  March,  1894,  of  the  Bureau  of 
American  Republics  estimates  the  exports  for  1894  at  2,000,000  tons, 
or  between  65,000,000  and  70,000,000  bushels. 

The  startling  showing  thus  made  of  sudden  and  great  increase  in 
production  is  made  more  so  by  the  data  thus  far  received  as  to  1894. 
When  I  first  made  note  of  matter  to  be  referred  to  on  this  discussion 
the  Corn  Trade  News  of  May  14  was  the  latest  number  of  that  peri¬ 
odical  showing  wheat  in  transport.  On  page  1122  I  find  that  there 
was  at  that  date  actually  afloat  in  transitu  between  the  Argentine 
Republic  and  Great  Britain  •  alone  1,500,000  quarters,  or  12,000,000 
bushels  of  wheat ;  and  that  there  were  also  in  transitu  at  the  same 
time  for  continental  ports  615,000  quarters,  or  5,000,000  bushels; 
while  the  list  of  ships  already  chartered  and  yet  to  load  was  simply 
an  appalling  one.  How  great  the  entire  shipment  of  wheat  from 
the  Argentine  Republic  to  Great  Britain  and  the  continent  will  be 
during  the  present  year  is  one  which  no  prudent  man  will  put  below 
most  extraordinary  figures.  All  calculations  have  already  been  dis¬ 
tanced,  and  not  until  the  capabilities  of  the  Argentine  Republic 
and  their  rate  of  development  have  become  more  generally  known 
than  at  present  would  it  be  safe  to  prophecy  what  is  the  future  of 
wheat-growing  in  the  United  States.  1  am  perfectly  well  aware 
that  there  is  more  than  one  consideration  which  may  mitigate  the 
result  which  now  seems  imminent.  I  ^suspect,  indeed,  that  the  unex¬ 
pected  increase  of  Argentine  production  may  have  so  startled  the 
business  world  as  to  have  been  more  than  discounted,  and  thus  to 
1455 


30 


have  made  prices  unremunerative  even  to  Argentine  producers. 
There  is,  however,  nothing  sure  as  yet.  The  situation  can  not  be 
handled  by  any  obstruction  interposed  by  our  Government  to  the 
most  economical  and  natural  methods  of  wheat  marketing  by  those 
who  are  engaged  in  it  here. 

There  never  has  been  a  good  time — there  never  will  be — to  enact 
any  such  legislation  as  that  proposed  by  this  bill.  It  see'ms,  how- 
ver,  like  the  irony  of  fate  that  it  should  be  pending  at  just  the  mo¬ 
ment  when  its  uselessness  has  been  most  thoroughly  demonstrated 
by  the  course  of  late  events,  and  when  the  damage  to  be  done  by  its 
enactment  will  be  of  most  fatal  consequence  to  American  wheat- 
growers,  who  are  now  facing  the  most  serious  crisis  by  which  they 
have  ever  been  met.  How  desperate  is  the  condition  which  this 
bill  would  further  aggravate  may  be  appreciated  when  I  note  that 
under  date  May  28,  1894,  I  am  advised  that  grain  room  to  Antwerp 
had  been  taken  the  week  before  at  Baltimore  for  nothing ;  that  is  to 
say,  that  one  of  our  great  grain-exporting  points  found  so  little 
demand  for  a  commerce  which  in  former  years  so  profitably  filled 
every  outgoing  vessel  as  to  bring  many  of  them  back  in  ballast, 
that  the  comparatively  few  vessels  which  have  brought  cargoes  to 
her  found  no  grain  to  be  carried  eastward,  except  what  they  were 
willing  to  take  as  ballast  alone  and  without  any  charge  whatever 
for  freight. 

I  do  not  know,  sir,  that  I  ever  felt  much  like  getting  very  indig¬ 
nant  at  Nero  because  he  fiddled  when  Rome  was  burning,  because, 
if  anything  is  well  established  historically,  it  is  that  he  was  a  good 
fiddler,  and  I  do  not  suppose  his  fiddling  helped  the  conflagration. 
[Laughter.]  But  now,  just  at  the  very  time  when  our  export 
trade  in  jtroduce  is  in  the  very  worst  peril  it  has  ever  experi¬ 
enced,  when  it  seems  essential  that  every  scope  should  be  given  our 
traders  to  handle  their  business  in  the  most  economical  and  easy 
way  possible — at  such  a  time  as  this,  for  my  friend  from  Missouri — 
who,  although  he  may  know  something  about  fiddling,  does  not 
know  anything  about  dealing  in  wheat  or  cotton — to  come  in  and 
propose  his  intermeddling  expedients  in  order  to  harrass  and  put  to 
further  expense  the  men  who  are  already  almost  driven  out  of  busi¬ 
ness,  is  almost  too  much  to  view  with  equanimity.  I  know  he  does 
not  mean  it ;  I  know  he  would  not  do  a  bit  of  hurt  intentionally ; 
but,  sir,  his  is  the  calm  assur  ance  of  a  baby  trying  to  mend  a  watch, 
or  an  anarchist  arranging  to  fix  a  government.  [Laughter.]  The 
only  trouble  is  that  the  gentleman  is  of  age,  and  we  cannot  deal 
with  him  according  to  our  sympathies,  but  must  do  so  with  regard 
to  the  merits  of  the  measure  he  proposes  to  father. 

It  would  fatigue  criticism,  sir,  to  attempt  any  adequate  expos6 
of  this  bill  and  of  the  depths  of  misinformation  disclosed  by  the 
report  which  accompanies  it.  And  I  care  now  to  call  attention  to 
but  one  further  consideration  in  this  line. 

THE  BILL  ENCOURAGES  “CORNERS.”  OBSTRUCTS  LEGITIMATE  BUSINESS,  AND  LEAVES 
GAMBLING  UNTOUCHED. 

Every  great  speculation  in  produce  which  has  brought  disaster 
either  to  the  producer,  the  consumer,  or  the  speculator  has  been 
made  effective  by  the  purchase  and  withholding  from  market  of  the 
actual  produce  involved.  If  this  law  forbade  this,  and  its  enforce¬ 
ment  could  prevent  thus  forestalling  the  necessaries  of  life  and 
industry,  and  demoralizing  the  business  dependent  upon  their  con¬ 
sumption,  there  might  be  some  excuse  for  4t.  So  far,  however,  is 
the  bill  before  us  incapable  of  producing  this  effect  that  it  does  not 
even  pretend  to  attempt  it,  but,  leaving  untouched  every  oppor¬ 
tunity  for  this  crime  against  civilization,  proposes  to  discourage 
1455 


31 


capital  from  produce  investments  so  as  to  make  more  easy  and 
more  disastrous  the  “  cornering  ”  of  the  actual  product.  The 
effect,  therefore,  is  to  discourage  legitimate  business  and  to  lessen 
the  amount  of  capital  available  for  carrying  the  world’s  stock  of 
produce,  thereby  facilitating  speculation  in  it  by  those  who  shall 
actually  attempt  to  forestall  it,  with  the  inevitable  result,  when 
the  market  breaks,  of  a  time  of  lower  prices  than  any  which  could 
otherwise  have  ruled. 

The  law,  however,  would  be  utterly  ineffective  to  prevent  gam¬ 
bling  in  farm  produce.  For  the  whole  world  is  to-day  a  single 
market,  and  purchases  are  made  from  Chicago,  at  London,  at  Berlin, 
at  Calcutta,  as  easily  as  they  are  at  Duluth  or  New  York.  Legiti¬ 
mate  business  must  be  carried  on  and  legitimate  investments  are 
made  along  well-defined  limits  of  trade,  and  within  comparatively 
narrow  limits  of  locality.  The  gambler  is  indifferent  as  to  the 
market  in  which  he  deals.  The  result,  therefore,  of  the  enactment 
into  law  of  this  bill  wmuld  be  to  demoralize  legitimate  business  in 
America.  As  to  gambling,  however,  it  would  still  be  carried  on 
by  the  same  men  in  the  same  way,  except  that  the  nominal  place  of 
the  fictitious  sales  and  purchases  would  be  London  or  Berlin  instead 
of  New  York  or  Chicago — in  the  world’s  markets  where  the  price  of 
these  products  is  fixed — and  whence  prices  in  America  would  be 
afflicted  (if  at  all)  precisely  the  same  as  though  the  fictitious  sales 
were  made  here. 

I  have  omitted,  sir,  to  refer  to  the  puerile  devices  by  which  it  is 
attempted  in  the  bill  now  pending  to  bring  within  the  scope  of  this 
bill  numerous  classes  of  contracts  which  ordinarily  would  not  be 
subject  to  the  jurisdiction  either  of  our  Government  or  that  of  any 
of  the  States.  I  shall  not  assume  that  there  is  any  member  of  this 
House  to  whom  they  will  not  upon  reflection  plainly  appear  to  be 
the  shams  which  they  really  are.  I  shall  not  dignify  them  by  the 
notice  involved  in  an  argument  against  them.  As  a  lawyer,  how¬ 
ever,  I  will  summarily  state — what  will  be  concurred  in,  I  believe, 
by  every  brother  lawyer  in  this  House — that  no  client  of  mine 
who  is  willing  to  do  his  business  through  foreign  offices  will  ever 
be  in  the  least  degree  troubled  by  them.  When  we  shall  all  have 
become  wonted  to  the  methods  I  shall  suggest  he  will  be  so  little 
bothered  by  anything  which  my  friend  from  Missouri  lias  concocted 
that  he  will  not  have  even  unpleasant  reason  to  remember  his  exist¬ 
ence.  But  to  the  American  citizen  who  must  do  his  business  here, 
I  can  offer  no  such  guarantee. 

CONSTITUTIONALITY. 

As  to  the  broad  question  of  constitutionality,  a  similar  reason 
would  prompt  me  to  let  the  obviously  unconstitutional  character  of 
this  legislation  develop  itself  from  the  arguments  of  those  who 
ventured  to  defend  it.  But,  sir,  I  have  another  reason — and  to  me 
even  a  better  one.  The  ends  proposed  and  the  means  suggested  are 
so  far  outside  of  what  seems  to  me  desirable  and  tolerable,  that 
questions  of  technical  constitutionality  are  of  little  moment.  To 
one  like  myself,  who  has  the  little  regard  for  the  intent  of  this  bill 
and  the  utter  abhorrence  of  the  means  proposed  that  I  entertain, 
it  is  worse  than  frivolous  to  urge  in  addition  that  it  is  unconstitu¬ 
tional.  On  the  other  hand,  with  anyone  who,  thoroughly  under¬ 
standing  the  scope  of  this  measure,  shall  deliberately  conclude  its 
end  to  be  laudable  and  its  means  proper,  I  do  not  care  to  discuss 
questions  of  constitutionality.  There  is  no  earthly  reason  in  my 
mind  why,  bent  upon  such  an  errand,  he  should  allow  himself  to  be 
restrained  by  either  law,  morals,  or  common  sense. 

If  there  is  any  man,  calling  himself  a  Democrat,  who,  after  fully 
understanding  this  bill,  needs  to  consult  the  constitution  or  any 
1455 


* 


3  0112  062025736 


32 


other  document  in  order  to  know  whether  he  shall  favor  it  or  not, 
then,  sir,  either  he  or  I  is  in  the  wrong  party. 

The  bill  is  simply  a  meddling  one.  If  enacted  into  law,  it  would 
be  worse  than  worthless  for  the  aims  it  professes  and  which,  in  sim¬ 
ple  charity,  are  all  those  which  I  attribute  to  the  conscious  intent  of 
those  who  promote  it.  It  is  so  outrageous  that  if  enacted  it  must 
promptly  produce  such  a  revulsion  as  shall  blot  it  from  the  statute 
books.  Were  it  a  Republican  measure,  I  should  have  it  photo¬ 
graphed  and  exhibited  as  a  horrible  example  of  the  consummate 
folly  of  blind  paternalism.  As  it  is,  I  can  only  appeal  to  those  of  my 
Democratic  friends  who  may  have  the  least  intention  of  supporting 
it,  to  keep  on  studying  it  until  they  are  sure  they  understand  it. 
This  being  done,  not  merely  is  the  measure  before  us  foredoomed, 
but  the  disgrace  of  even  the  presentation  of  another  of  its  character 
ever  averted  from  our  party. 

The  chairman  of  the  committee  reporting  it  has  admitted  that  the 
bill  is  an  attempt  to  interfere  with  what  he  concedes  to  be  legitimate 
business  in  order  virtually  to  apply  Federal  criminal  law  to  a  matter 
which  he  confesses  is  none  of  the  business  of  the  United  States 
Government.  And  in  order  to  dodge  the  Constitution,  he  proposes 
another  evasion ;  and  under  the  assumption  that  this  subject  belongs 
to  the  Committee  on  Agriculture,  brings  in  a  revenue  bill,  and  inter¬ 
feres  by  an  unconstitutional  use  of  the  taxing  power. 

It  seems  to  me,  sir,  that  as  representatives  of  the  various  sections 
of  this  country,  we  should  not  merely  avoid  interference  with  the 
legitimate  business  of  citizens,  but  that,  as  Congressmen  of  the 
United  States  of  America,  we  should  confine  the  exercise  of  our 
functions  within  that  range  of  both  criminal  and  civil  law  that  is 
confided  to  our  jurisdiction.  As  Democrats  we  should  remember 
that  the  welfare  of  this  country  demands  less  rather  than  more  of 
Federal  interference;  that  we  come  here  not  to  extend  paternalism 
but  to  abolish  it;  and  that  our  office  is  rather  to  repeal  bad  law* 
than  to  make  worse  ones.  [Loud  applause.] 

14&& 


o 


